The Business Times

Barclays profit misses estimates on bonus deferral charge

Published Thu, Feb 23, 2017 · 10:53 AM

[LONDON] Barclays Plc posted fourth-quarter profit that missed analysts' estimates on a charge for accelerating the costs of deferred bonuses, while the bank signaled progress in its effort to divest its Africa unit and sell off unwanted assets.

Pretax profit was £330 million (S$583.702 million), from a loss of £2.1 billion a year ago, the London-based lender said in a statement Thursday. Adjusted pretax profit rose to £284 million, falling short of the £646 million average estimate of five analysts surveyed by Bloomberg News.

The results mark the end of chief executive officer Jes Staley's first year in charge, in which he rebuffed calls to spin off or radically shrink the investment bank, instead opting to speed up business sales and sell down the firm's African business.

The bank said Thursday it will close the unit that houses its unwanted assets six months earlier than expected, and that it reached a separation agreement with management of the Africa division.

"We look forward to ending the restructuring of Barclays that's been going on for years in a matter of months, and I think our shareholders will look forward to that," Mr Staley, 60, said in a Bloomberg Television interview.

The firm has "resolved the issue of do we have the capital base to manage this bank going forward. I think we do and Africa is going to be an important part of that".

The firm's common equity Tier 1 ratio, a measure of capital strength, rose to 12.4 per cent from 11.6 per cent at the end of the third quarter. That surpassed analyst expectations for an 11.8 per cent ratio.

"Management are continuing to deliver ahead of expectations on the restructuring plan," JPMorgan Chase & Co analysts wrote in a note to clients.

"The next leg of upside is dependent on earnings and dividend growth."

Fixed-income revenue jumped 33 per cent to £766 million, while the five major US investment banks collectively posted a 43 per cent jump.

Analysts at Sanford C Bernstein and Deutsche Bank AG had expected income at the unit to climb by about 40 per cent to £800 million, while those at Credit Suisse Group AG forecast a 52 per cent gain to £875 million.

Equities trading revenue climbed 29 per cent to £410 million, a bigger jump than analysts expected.

Bond-market volatility has been spurred by the UK's surprise vote to leave the European Union, the victory of Donald Trump in the US election in November and divergent views on the direction and timing of central-bank interest rates.

The charge on bonus deferrals was £395 million. Banks typically recognise the cost of deferred bonuses only when the awards vest, not when they're first awarded. Barclays said for 2016, it changed the proportion of bonuses that are deferred, which in part led to the charge.

Barclays will reintegrate the £25 billion of risk-weighted assets it expects to have left in its non-core unit at the end of June, instead of a previous target to close the unit with £20 billion at the end of the year.

The division will generate about £1 billion of pretax losses this year, the bank said.

Barclays has recovered most of its post-Brexit losses, climbing 53 per cent since June 24, and is trading 5 per cent higher this year. However after a two-year slump, the bank still trades at about 30 per cent below the book value of its assets and the dividend was slashed in half last year to conserve capital.


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