The bank’s loss was put down to a hit by higher litigation and conduct charges with the US DoJ and an additional £400m for payment protection insurance (PPI) claims.
The bank saw an 8% drop in its total income at £5.36bn, down from £5.82bn this time last year.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Litigation is the big swing factor which has pushed Barclays into the red, with a hefty additional PPI charge which shows the FCA awareness campaign is really starting to bite.
“This probably won’t be the last big chunk of money sunk into the PPI pit by the UK banking sector, as nothing motivates consumer action quite like a deadline, and the compensation claims window closes next August.”
In the trading update this morning, the bank revealed that excluding the DoJ and PPI charges, profit before tax rose by 1% to £1.7bn, driven by a 45% improvement in credit impairment charges and a 6% reduction in operating expensive.
Commenting on the results, group chief executive officer James Staley (pictured) said: “This has been a significant quarter for Barclays, one in which we have shown that our new operating model and our portfolio of diversified, profitable businesses are capable of producing improved returns for shareholders.
“This quarter we also reached an agreement with the US Department of Justice to resolve issues related to the sale of residential mortgage-backed Securities between 2005 and 2007.
“While the penalty was substantial, this settlement represents a major milestone for Barclays, putting behind us a significant decade-old legacy matter.”
On the back of the results, shares fell 2% in early morning trading.
Not a disaster
Although Barclays have faced a loss in its latest results, Khalaf said performance was “a disappointment rather than a disaster”.
Despite a great deal of financial pain, Khalaf said issues are resolved and now in the “rear-view mirror”.
“There’s a lot not to like about Barclay’s latest results, although many of the factors hampering the bank are one-off items which don’t speak for the future prospects of the business,” he said.
However, Ian Forrest, investment research analyst at The Share Centre, said the results were a mixed bag.
“The improvement in profitability at the corporate and investment banking business is welcome and the bank increased its attributable profit, which strips out the charges, from £209m to £1.2bn.
“However, the decline in UK revenues is a concern and as a result, our overall rating remains a ‘hold’.”
Top 10 funds with the largest holdings in Barclays:
| Fund | Holding |
| Smith & Williamson – Cash – Jan 95 | 14.50% |
| Old Mutual – Equity 2 – Dec 02 | 6.63% |
| Old Mutual – Financials Contingent Capital – Aug 17 | 6.10% |
| Jupiter – UK Growth – Apr 88 | 6.06% |
| Investec – UK Special Situations – Oct 88 | 5.70% |
| Invesco Perpetual – UK Focus – Jul 01 | 5.65% |
| Waverton – Sterling Bond – Jan 10 | 5.60% |
| UBS – UK Opportunities – Jul 02 | 5.30% |
| Schroder – Recovery – Feb 92 | 5.19% |
| Scottish Friendly – UK Growth – May 01 | 5.02% |
Source: FE Analytics
Lawsuits
Barclays’ Q1 results follow news last week that CEO Staley would be allowed to keep his job but would face a fine for an alleged breach of conduct in his attempts to uncover a 2016 whistleblower.
Khalaf added: “Recent conduct matters haven’t all been negative for Barclays, after all its CEO Jes Staley has been deemed fit and proper to run the business, despite his interference in a whistleblowing case.
“However 2019 promises to be a difficult year on the litigation front, with a criminal case pertaining to Barclays’ dealings with Qatari investors waiting to kick off, and a civil lawsuit pending thereafter.”
Beyond litigation matters, Khalaf said “a weaker dollar and one-off gains” contributed to the loss, making a year-on-year comparison unflattering.
