It wouldn’t be a set of banking results without adjustments for one thing or another, and Barclays is true to form with its latest results.
Fourth quarter profits were depressed by a £498 million credit impairment charge linked to a worsening economic outlook. On a full year basis, earnings were also hit by £1.6 billion of litigation and conduct charges from over-issuance of securities in the US.
AJ Bell’s Russ Mould said: “While the UK has so far avoided a technical recession, things are bleak out there for many consumers and businesses, which suggests some loans may not be paid back in full unless the economy picks up. Barclays also has overseas operations and economic conditions in other parts of the world where it does business aren’t exactly rosy.
“Deals are drying up with regards to mergers and acquisitions and stock market flotations, which means Barclays’ investment banking arm saw profits tumble. That will be bad news for all the bankers currently on the ski slopes expecting fat bonuses.
“In a buoyant market, this part of Barclays would be charging hefty fees to help companies raise money. This type of work can be very lucrative, so a dearth of deals will be as painful to Barclays as having a tooth extracted with no anaesthetic.
“To make matters worse, investors expecting a bumper share buyback will have their hopes dashed as the bank only intends to buy a further £500 million worth of stock in its current programme. In an environment where banks are one of the few beneficiaries of rising interest rates, one might have expected Barclays to dig deep and buy back a lot more shares, which would in turn boost shareholder returns.
“Overall, there isn’t much to get excited about beyond the performance of its consumer lending business which was boosted by higher interest rates.”
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