Mounting forex probe costs and an extra PPI compensation bill helped to push Barclays into the red in 2014, as the bank yesterday said its restructuring programme is ahead of schedule.
Barclays reported an attributable loss of £174m for the year, compared with a £530m profit in 2013.
Much of the damage came from provisions for likely legal costs relating to foreign exchange benchmark manipulation allegations. Barclays added £750m to its provisions to cover the case, on top of the £500m already set aside.
And it added another £200m to its PPI provisions. Those costs leave it with a negative return on equity.
Investors were unhappy with the results – Barclays’ shares fell 3.22 per cent on the day.
However, bosses were pleased with the profits in the core units of the business, which they hope will represent the underlying performance of the bank going forwards once its “transform” programme is complete.
They pointed to the 12 per cent rise in adjusted pre-tax profits to £5.5bn.
“In our core business, the future of Barclays, adjusted return on equity was nearly 11 per cent, excluding costs to achieve transform, tracking well towards the 12 per cent plus we are targeting for 2016,” said chief executive Antony Jenkins.
“Barclays non-core run-down is ahead of target, with risk-weighted assets reducing by £35bn to £75bn.”
As a result, Jenkins is taking his £1.1m bonus for the first time since he took the reins at the bank in 2012.
However, the overall bonus pool has shrunk by 22 per cent to £1.86bn.
Underlying costs fell nine per cent, excluding the costs to achieve the fall in expenses.
“We have reduced the cost base substantially, by £1.8bn. This is my first full year at Barclays and I was intrigued to compare this – I have gone back to 1989 and not found a year where costs were reduced by an equivalent amount,” said finance director Tushar Morzaria. “I am encouraged by our progress. There is a lot of digitisation and automation. Digitisation gives a very good customer experience, and a lower cost service for us – it is a win-win.”
BARCLAYS: KEY NUMBERS
Barclays made an attributable loss of £174m in 2014.
But that headline figure disguises a wide variety of good and bad performances in the banking group.
Pre-tax profits at the personal and corporate banking business – increasingly the key focus of chief executive Antony Jenkins – rose 29 per cent on the year to £2.9bn.
Barclaycard, which Jenkins once ran, saw profits rise 13 per cent to £1.3bn.
But its African business’ profits slid six per cent to £984m. And the investment bank crashed 32 per cent to £1.4bn.
Commission income in the investment bank fell four per cent to £3bn, while net trading income dropped 25 per cent to £3.7bn.
At the same time, operating expenses fell nine per cent to £5.6bn. But the costs to achieve its transform programme came to £374m – out of a total of £1.2bn for the group overall.
Major costs came in provisions and legal bills. Barclays set aside £750m more for forex investigation costs in the final quarter, and an extra £200m for PPI compensation.