Thursday 18 February 2021 8:42 am

Barclays to resume dividend as Covid loan provision hits £4.8bn

Barclays today said it will resume its annual dividend as the banking giant’s profit suffered a less severe hit from the pandemic than expected.

The bank announced a dividend of 1p per share, as well as a £700m share buyback, after regulators banned payouts last year following the outbreak of Covid-19.

It came as Barclays reported a pre-tax profit of £3.1bn last year. This was 30 per cent down on the previous year but well ahead of analyst forecasts.

Profit for the fourth quarter fell more sharply, dropping from £1.1bn to £0.6bn. Total income for the year was flat at £21.8bn.

Pandemic impact

Barclays, alongside other major high street banks, has been hit by additional credit impairment charges due to the economic impact of coronavirus.

The bank said it had set aside £4.8bn for bad loans in 2020, more than double the amount of the previous year.

But this was offset by a strong performance in Barclays’ investment bank, which benefited from a surge in trading volumes and volatility early in the year.

Income from this division surged 22 per cent to £12.5bn, accounting for more than half the bank’s income.

By contrast, its consumer, cards and payments division dropped by more than a fifth to £3.4bn due to lower credit card balances, reduced payment activity and lower margins.

Sudeepto Mukherjee, senior vice president of financial services at Publicis Sapient, said the bank’s resilience was largely due to its diversified business model.

“Barclays will have to continue to focus more on cost reductions via digitisation and get their retail businesses to be competitive as consumer spending picks up in 2021 to maintain their strong performance against rivals,” he said.

Barclays chief executive Jes Staley said the bank was well provisioned for impairments, adding that it expected to deliver a “meaningful improvement” in returns in 2021.

The performance drove up the bank’s bonus pool six per cent in 2020 to £1.6bn.

However, boss Staley’s overall pay fell from £5.9m to £4m as the bank missed its profit target for the year.

In an earning calls the chief executive insisted Barclays would keep a “significant presence” in Canary Wharf despite a shift to home working during the pandemic.

Staley had prompted speculation that Barclays could reduce its office space in the financial hub after he said Covid-19 could make large offices a thing of the past.