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Monday 9 December 2019

Barclays swings to £1.9bn net loss amid Carillion collapse and Trump tax hit

Pre-tax profits rose 10% to £5.3 billion for 2017, but a raft of charges left it nursing a £1.9 billion bottom-line loss.

Barclays has swung to a near £2 billion net loss after taking a string of charges in 2017.
Barclays has swung to a near £2 billion net loss after taking a string of charges in 2017.

By Holly Williams, Press Association Deputy City Editor

Banking giant Barclays has swung to a bottom-line loss of nearly £2 billion after a string of hefty charges including Donald Trump’s corporate tax changes and a hit from the collapse of Carillion.

Boss Jes Staley hailed a year of “considerable strategic progress” as pre-tax profits rose 10% to £5.3 billion for 2017, but an after-tax loss of £1.9 billion against profits of £1.6 billion in 2016 revealed the toll taken on its bottom line.

It was pushed into the red by £2.5 billion in previously-announced losses from the sale of Barclays Africa Group and a £901 million charge from the US president’s January 1 corporate tax changes, as well as a £127 million blow in the fourth quarter from failed outsourcing giant Carillion.

Jes Staley is chief executive of Barclays (Barclays/PA)

The group’s profits stripping out these charges were also lower than expected as its investment bank saw earnings dive 22%.

It said “weak market conditions” for its corporate and investment bank saw profits in the division tumble to £2.1 billion last year from £2.7 billion in 2016.

But the bank cheered investors as it announced a 3p-a-share dividend and said it would more than double the payout next year to 6.5p.

Shares lifted 5%.

Its annual report published alongside the results showed that Mr Staley’s total pay package fell to £3.9 million in 2017 from £4.2 million in 2016.

His annual bonus was cut to £1.1 million from £1.3 million in 2016, while his salary remained at £2.4 million and the bank said it was keeping his bonus payments “under review” while he is under investigation over an attempt to identify a whistleblower.

The Financial Conduct Authority and the Prudential Regulation Authority are investigating the American’s conduct relating to the incident in 2016.

Despite the investment bank woes, staff shared out a £1.51 billion total bonus pool for 2017, down just 2% from 2016.

And more than 369 employees earned more than £1 million last year, while 11 took home pay deals worth more than £5 million, according to the annual report.

Of these, 32% are based in the UK, 61% in the US and 7% elsewhere internationally.

The investment bank looks like a casino where the house isn’t winning Laith Khalaf, Hargreaves Lansdown

The results come after Mr Staley recently completed a group-wide restructure, having overseen a mammoth programme to offload non-core businesses in a bid to focus on core UK and US operations.

Barclays has shed 60,000 jobs as part of the shake-up, while also selling off businesses such as the Africa arm.

Mr Staley said the group was already starting to “see some of the benefits of our work” in 2017.

He said: “We have a portfolio of profitable businesses, producing significant earnings, and have plans and investments in place to grow those earnings over time.”

He added: “Although we are only seven weeks into the first quarter … we are pleased with the start to the year, and in particular in the markets businesses in CIB (corporate investment banking).”

The 2017 results showed Barclays set aside £1.2 billion for litigation and conduct, including £700 million for payment protection insurance (PPI).

Its Carillion hit adds to the charges taken across the sector after a raft of British banks were exposed to the outsourcer through unpaid loans.

Santander was also one of the worst affected, with its annual profits dragged down by £203 million in impairment losses, primarily made up of loans to Carillion gone bad.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “A promise to double the dividend this year has naturally got the market very excited, but revenues at the UK bank have actually flatlined, while the international division is flagging.

“In particular the investment bank looks like a casino where the house isn’t winning.”

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