COVID-19: Barclays sees profits drop 30% as provision for bad loans in pandemic hits £ 4.8bn | Economic news
Barclays announced a 30% drop in pre-tax profits, as its provision for bad debts due to the pandemic hit £ 4.8 billion.
However, the decline to £ 3.1bn in 2020 was well below expectations, as the strong performance of its investment bank offset cash set aside to deal with losses caused by the economic fallout from COVID-19[female[feminine.
Despite the affected profits, the banking giant has said it will resume paying dividends after lenders halted payments last year at the request of the Bank of England.
This raises expectations that other UK lenders will follow suit when they release their annual results in the coming days.
Barclays also unveiled a £ 1.6bn bonus pool for staff and £ 1.4m in annual bonuses and incentive actions for chief executive Jes Staley.
The bank’s posted profit was well above the average estimate of £ 1.96 billion analysts’ forecasts compiled by the bank.
The results also revealed that an additional £ 492million had been set aside to cover expected defaults from borrowers due to the coronavirus crisis in the last three months of the year, although that figure was down almost a fifth from the previous quarter.
The lender has warned pandemic costs will remain high through 2021, but expects loan loss charges to be ‘significantly lower’ than the £ 4.8bn figure .
However, Barclays said its investment arm made up for the impact on its retail operations, with its “best year ever” for markets and banking income helping to keep the group in profit each quarter. .
Mr Staley said: “Given the strength of our business, we have decided that the time has come to resume distributions of capital.
“We announced today a total payout equivalent to 5p per share, comprising a dividend of 1p 2020 for the full year and the intention to initiate a share buyback up to £ 700million.”
He added, “We expect our resilient and diversified business model will lead to a significant improvement in returns in 2021.”
In its annual report released with the results, Barclays revealed that the staff bonus pool was 6% higher than the £ 1.5 billion shared in 2019.
He said this represented a “relatively modest increase in investment banking activities, reductions for all other activities and proper recognition for the contributions of our more junior colleagues.”
Mr Staley’s annual bonuses have brought his total salary to £ 4.01million for 2020, although this is lower than the £ 5.9million paid in 2019.
Dividends and bonuses will be in the spotlight this year in banking earnings season, with documents intended to fuel controversy amid the economic turmoil caused by the pandemic.
The Prudential Regulation Authority (PRA) recently gave the green light to lenders to resume payments to shareholders.
But UK listed bank stocks fell sharply during Thursday’s session as investors scared the national landscape with Barclays leading the pack, down 5%.
Faced with the expected gigantic losses on loans which impacted the company’s numbers, Mr Staley said that “2020 has demonstrated the value of our diversified banking model”.
Stock market volatility since the start of the pandemic has contributed to a 45% increase in revenue to £ 7.6 billion for its markets unit, which trades in fixed income, stocks and derivatives.
But its consumers, cards and payments division fell to a loss of £ 388million in 2020 amid loan losses and the wider economic turmoil.