Barclays said rising profits from its investment bank will be enough to restore capital levels depleted by misconduct fines in Britain and the US, as the British lender announced a characteristically mixed set of first-quarter earnings.
The earnings came a week after Barclays announced chief executive Jes Staley would keep his job but face a fine following the results of a regulatory probe into his attempts to unmask a whistleblower. Staley told reporters he is “very comfortable” with the results of that investigation when asked if he would challenge the findings, suggesting he could move swiftly to pay the fine and try to put the matter behind him.
Barclays shares initially fell by more than 2.5 per cent yesterday morning as investors digested the bad news in the earnings report first but the shares then recovered.
That bad news included a core capital ratio that fell to 12.7 per cent and a statutory loss for the quarter of £236 million, both driven by fines and legal costs from historic misconduct issues.
Barclays took a £1.4 billion hit from settling with the US Justice Department over the sale of toxic mortgage-backed securities in the run-up to the 2007 financial crisis. Cover for claims against mis-selling of payment insurance products in Britain cost it a further £400 million.
Barclays shares later recovered partially as investors looked beyond the conduct costs to see an improved performance at its under-pressure investment bank, which executives said will prevent the need for a capital raise.
“We feel pretty comfortable, we generated 43 basis points of capital in this quarter alone... so to get back to 13 per cent [core capital ratio] is relatively straightforward,” the bank’s finance director Tushar Morzaria told reporters in a conference call.
Analysts with both buy and sell recommendations on the stock found evidence in the results to support their ratings.
“Buy thesis is intact although we expect much ‘weeping and gnashing of teeth’ on the conference call around capital,” said Joseph Dickerson at Jefferies.