Barclays profits fall 21% (but it's alright)

The bank's otherwise healthy bottom line is scourged by seven plagues of exceptional items, including a £750m hike in Forex payouts.

by Adam Gale
Last Updated: 03 Mar 2015

Barclays profits fell 21% to £2.26bn in 2014, as an array of exceptional items savaged its accounts.  The bank had been hoping to put the Forex scandal behind it, but was forced to increase its provision for potential payouts by £750m in the last quarter, raising the total set aside this year to £1.3bn.

At the same time, the bank was hit by a £446m loss from the sale of its Spanish branches and a £935m ‘valuation revision’ of its education, social housing and local authority loan portfolio. Just for good measure (and to the delight of anyone who’s ever had one of those infuriating cold calls on the subject), it was also forced to set aside an additional £200m for payment protection insurance compensation, bring its total for the year to £1.1bn. The all time compensation bill for banks is now an eye-watering £24.4bn.

Not exactly seven plagues then, but at £3.7bn between them, it’ll do. To make matters more complicated, the fall in statutory profits actually disguises a rise in underlying profits. Ignoring exceptional items, Barclays made £5.5bn in the year to December 31st, 12% up on 2013. Don't you just love bank results?

Though profits at its investment bank fell 32% to £1.4bn, this was more than offset by a 29% increase in the retail division (£2.9bn).

At the heart of Barclay’s strong underlying performance is its Transform programme of cost cutting. Underlying costs fell 9% to £18.1bn, with the bank’s net head count falling 5%. This even extends to the infamous bankers’ bonuses – the pot at Barclay’s shrunk 22% to a meagre £1.9bn.

One person who managed to avoid the belt-tightening squad was boss Antony Jenkins, who took a £1.1m bonus – the first he’s taken since taking the reins in 2012. To be fair to him, Jenkins has done well so far in ‘restructuring’ the bank. Although revenues declined 5% to £23.6bn, this was more than offset by his cost-cutting measures.

‘Barclays today is a stronger business, with better prospects, than at any time since the financial crisis,’ Jenkins said, before addressing the issue of fines. ‘I regard the behaviour at the centre of these investigations as wholly incompatible with our values and I share the frustration of colleagues and shareholders that matters like these continue to cast a shadow over our business.’

Jenkins said that despite progress, there was still real work to do. He’s right. Barclays may be turning a nice profit once the exceptional items are discounted, but it could be a while before such items stop cropping up on its books.

Read MT's in-depth interview with Antony Jenkins

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