Barclays Warns on 2021 Outlook as Trading Beat Fuels Buyback

Barclays Warns on 2021 Outlook as Trading Beat Fuels Buyback
Stefania Spezzati

(Bloomberg) -- A strong end to the year for Barclays Plc traders helped the British lender deliver a share buyback and a return to dividends even as the bank said the outlook for 2021 remained uncertain.

The London-based firm’s securities division reported a better-than-expected 45% rise in markets revenue for the year, the biggest trading jump among major global investment banks. That offered a bright spot while the pandemic slammed the bank’s lending businesses, an impact Barclays said was likely to persist this year.

“2020 demonstrated the value of our diversified banking model, delivering resilient group results even in a difficult macroeconomic period, driven by the performance of our CIB,” said Chief Executive Officer Jes Staley, who has championed the corporate and investment bank as a counterweight for tough times for retail banking.

Barclays, the first of the major British banks to report earnings, signaled that Covid-19 restrictions on socializing continued to pummel the wider economy. Profit before tax at its domestic business fell more than half to 282 million pounds ($391 million) in the fourth quarter, while its U.S. credit card business saw pretax profit decline by about three quarters.

Barclays’ outlook was cautious. “Headwinds to income in Barclays U.K. are expected to persist in 2021 and the medium-term,” the bank said in a statement.

London-listed shares in the firm were down 1.2% at 8:51 a.m.

“Overall, a good set of numbers, but focus is likely to be on the 2021 outlook statement which is very light on detail,” analysts at Citigroup Inc. said in a note to clients. The bank said on Thursday that the return on tangible equity expected to “meaningfully improve,” without giving a target. “The lack of context is unhelpful,” Citigroup said.

The bank took a 492 million-pound charge to anticipate loans defaulting due to the pandemic, less than expected, to bring the total for the year to 4.8 billion pounds.

The bank booked about 370 million pounds for changes including “real estate rationalisation, branch optimisation and the discontinued use of certain software assets.” Staley said on Bloomberg TV that while the lender was rapidly moving toward more digital services, “you’re not going to see a major restructuring from the bank in terms of cutting costs.”

Limited Dividends

Barclays will pay investors 5 pence per share through a 1-pence dividend along with a buyback of as much as 700 million pounds that will begin within weeks.

The Bank of England set strict limits on dividends or buybacks after relaxing a ban intended to preserve capital during the pandemic. Payouts cannot exceed 25% of a lender’s profit over the past two years, after deducting previously paid dividends, or 0.2% of risk-weighted assets. Staley said at last year’s earnings that the bank was looking at the possibility of buybacks.

More detail from the bank’s fourth quarter:

Corporate and investment bank revenue of 2.6 billion pounds; analysts forecast 2.5 billion poundsAdjusted pretax profit of 693 million pounds; forecast 386.4 million poundsCapital ratio on a Common Equity Tier 1 basis of 15.1%; forecast 14.4%“Well positioned to continue providing services in the EU” following Brexit

(Adds more detail on outlook throughout)

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