Barclays: profit falls after brokerage error in the United States

Net profit attributable to the group was down 18% to 1.4 billion pounds, while turnover increased by 10% to 6.5 billion pounds.

British bank Barclays saw its net profit fall in the first quarter due to a sharp rise in legal charges, linked to a bond brokerage error in the United States which could cost it dearly.

Net profit group share was down 18% to 1.4 billion pounds (1.70 billion francs) while turnover increased by 10% to 6.5 billion pounds, according to a statement on Thursday.

Legal expenses increased by almost half a billion pounds in the quarter due to the overselling of structured securities in the United States.

The bank announced at the end of March that this oversale gave rise to a right of withdrawal for certain buyers, resulting in a possible loss then estimated at up to 450 million pounds.

By contrast, while rivals LLoyds and HSBC have made large provisions for credit losses linked to runaway inflation in the UK, Barclays is maintaining its own at £100m, saying it remains “appropriate given the inflationary pressures.

“Revenue growth was partially driven by global markets”, despite a context of “market volatility due to economic and geopolitical challenges, including the devastating war in Ukraine and the impact of higher interest rates high in the US and UK,” commented Managing Director CS Venkatakrishnan.

Overselling of structured securities

Mortgage revenue is also “robust” with rising rates and strong demand, and customer consumer spending remains strong even as inflationary pressures loom, Barclays’ statement added.

On the other hand, the investment banking division saw its revenues decline.

“We remain focused on the impact of high prices on our retail and business customers,” also facing the global supply chain crisis and soaring energy costs, adds Venkatakrishnan.

At the end of March, the announcement of the excessive sale of structured securities had brought down the title of the bank, which launched an internal investigation into this unfortunate operation.

Barclays is also under investigation by the FCA, the British market authority, into the relationship of ex-boss Jes Staley with the financier charged with sexual exploitation of a minor, Jeffrey Epstein, who committed suicide in jail in 2019.

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