Barclays profits more than double as impairments plunge

UK bank Barclays on Friday said first quarter profits had more than doubled, but cautioned that its outlook remained uncertain due to the Coviud-19 pandemic.

The company posted a better-than-expected pre-tax profit before tax for the three months to March 31 of ended March 31 of £2.4bn, up from £923m pounds a year ago and compared with forecasts of £1.76bn.

Impairment charges came in at £55m, compared with £2.1bn in 2020 and significantly lower than the £500m expected by analysts. The decrease was driven by reduced unsecured lending balances, “no material single name wholesale loan charges and limited portfolio deterioration”, Barclays said.

Unlike sector peers Lloyds, HSBC and NatWest, Barclays did not release any cash set aside to cover potential bad loans from the pandemic despite a brighter economic outlook as the UK moves out of lockdown measures.

However, the figures failed to impress investors, with Barclays shares shown 6% in early trade, as traders took a wary view of the decision not to adjust previous bad debt estimates "along with a patchy investment banking performance and a cautious view on costs", said Russ Mould, investment director at trading platform AJ Bell.

“Nonetheless it is still surprising to see such a seemingly positive set of numbers overall receive raspberries rather than rewards from the market."

The bank's investment unit reported mixed results, with the fixed income, currencies and commodities unit reporting a 35% decline in income. Overall divisional income fell 1% to £3.6bn with with equities and banking up 65% and 35% respectively.

"While evidence of recovery is encouraging, we have continued to take a cautious view of the impact of the pandemic on the business," said chief executive Jes Staley.

"We remain disciplined on costs, with a cost to income ratio of 61% this quarter. Our capital position remains well above target with a CET1 ratio of 14.6% and we completed our £700m buyback this month. We will give further guidance on distributions when appropriate."

Staley said spend data, which captures UK economic activity across the bank's cards and acquiring businesses, revealed "encouraging early signs of recovery in some sectors, including those hit hardest by the crisis".

AJ Bell's Mould said the lack of a dividend was unsurprising, but was "still likely to nag away at investors for whom a big driver for investing in banks is income – with Barclays not yet providing clarity on when normal service on payouts will be resumed”.