UK: Barclays Q1 profits down 25% as costs of turnaround plan top £500m

Barclays chief executive Antony Jenkins
Photo: Visual Media/PA

Barclays chief executive Antony Jenkins Photo: Visual Media/PA - Credit: PA

BARCLAYS’ first quarter profits slumped by a quarter as the costs of its overhaul began to kick-in, it emerged today.

Adjusted pre-tax profits at Barclays fell 25% to £1.8billion in the first three months of the year, after £514million of costs for its “Transform” turnaround plan.

The bank also revealed rising bad debts in the UK and Europe, driven by higher defaults on unsecured loans in the UK and troubled Spanish and Portuguese mortgages.

Barclays, which has been mired by the Libor-rigging scandal, has already revealed plans to axe 3,800 jobs this year and shrink its European retail banking operations under a drive to cut £1.7bn of costs by 2015.

However, It said that, excluding costs largely relating to the overhaul, it swung to underlying profits of £1.5bn from a £525m loss a year earlier.


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And Barclays added that a good start to the year has continued into its second quarter, giving its shares a boost of more than 2% in early trading.

Chief executive Antony Jenkins said the bank was making good early progress with its overhaul, and expects another £500 million of costs this year from the turnaround.

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He said: “In our goal to become the ‘Go-To’ bank we have not chosen an easy path for Barclays, but we have chosen the right one.”

Bad debt charges in its UK retail and business banking arm increased £13m to £89m during the quarter as more people struggle to repay unsecured loans.

A £16m increase in European bad debt charges to £70m was blamed in part on rising defaults on Spanish and Portuguese mortgages.

However, impairment charges across the group fell 10% to £706m, mainly reflecting improvements in investment and corporate banking.

Barclays last week announced the departure of flamboyant investment banking chief Rich Ricci, who will leave during the summer after 19 years at Barclays and be replaced by co-heads Eric Bommensath and Tom King.

Mr Jenkins said: “I’m comfortable with the team we’ve got in place to take the bank forward.”

The bank did not increase its £2.6bn provision to cover mis-sold payment protection insurance (PPI), and said the volume of customer claims continued to fall in the first quarter. It had used £1.9bn of this provision by the end of March.

The bank also did not increase its provision for mis-selling of interest rate swaps, after setting aside £850m last year to cover the scandal.

Barclays said it had no update on its search for a replacement for outgoing finance director Chris Lucas.

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