Barclays Profit Slides As Costs Surge, Deals Fees Collapse

Barclays reported a 14% fall in annual profits, hurt by surging expenses and by an administrative blunder that led to costly fines and which compounded a collapse in deal fees earned by its investment bank.

The British lender reported a pretax profit for 2022 of 7 billion pounds ($8.5 billion), down from 8.2 billion the year before and just below the 7.2 billion average analyst forecast, as compiled by the bank.

The bank's shares fell 8% in early trading and were on track for their biggest one-day fall since the day Russia invaded Ukraine.

Analysts branded the figures as underwhelming, particularly in a period of rising interest rates and resilience among borrowers in the face of inflation and higher costs of living.

"When Barclays can turn its back on errors and legacy issues, which have been a consistent part of results in recent years, the bank should be the best-placed of the major UK lenders in the current environment," said John Moore, senior investment manager at RBC Brewin Dolphin.

Return on equity booked by the international unit, which houses Barclays' transatlantic investment bank, fell to 10.2% from 14.4% a year earlier, as fees from advising on debt and equity fundraising plunged by almost two-fifths year-on-year.

Profit before tax in that division also tumbled by 23% to around 5 billion pounds.

Barclays said revenue from Fixed Income, Currencies and Commodities (FICC) trading, its traditional strength, rose 65% to 5.7 billion pounds from the previous year, beating U.S. rivals Morgan Stanley and Goldman Sachs which reported 20% and 38% year-on-year increases respectively in 2022.

Barclays will pay an annual dividend of 7.25 pence per share, in line with forecasts, and also announced a fresh share buyback of 500 million pounds to bring the total for 2022 to 1 billion pounds.

REGULATORY COSTS

Barclays' litigation and conduct charges for the year came in at 1.6 billion pounds, including fines and restitution to customers from overstepping agreed limits on sales of securities in the United States.

In its annual report also published on Wednesday, Barclays said it had docked top executives' pay by a combined 1 million pounds to reflect the regulatory missteps.

Barclays' results were further marred by 1.2 billion pounds in credit impairment charges and a 26% leap in costs to 8.9 billion pounds.

The cost increase came despite a smaller bonus pool being awarded to its bankers of 1.8 billion pounds, down from 1.9 billion the previous year.

The bank said it would not hit a medium-term target of reducing its cost-to-income ratio below 60% in 2023, and would instead look to invest in its investment bank and technology.

Barclays is the first big British bank to report its annual earnings this week, with analysts and investors likely to focus more on the bank's forward-looking guidance about the outlook for this year, than on its performance in 2022.

The lender said it would achieve its goal of making a more than 10% return on tangible equity next year, having previously described this as a "medium term" goal.

($1 = 0.8239 pounds)