Barclays announced that its pre-tax profits for fiscal year 2014 fell by 21% down to £2.26bn. The bank increased the amount of money it had set aside from £750m to £1.25bn to pay for potential fines in case a probe finds the bank guilty of misconduct.
Barclays Reports 21% Fall In Pre-Tax Profits
While the bank reduced the amount of money set aside for bonuses down to £1.86bn, it awarded CEO Antony Jenkins £1.1m in bonuses, increasing his total salary payout to £5.5m.
The bank also reported that it had increased protection insurance compensation by £200m bringing the annual total PPI to £1.1bn.
According to CEO Jenkins, the financial wellbeing of Barclays is at its best since the start of the global financial crisis. Annual results do show that Jenkins’ optimistic view could be appropriate.
“We have come a long way since the financial crisis. I will emphasize that we are not yet done, we’ve a lot of work to do but we have made great progress and the bonus is a reflection of that,” Jenkins said in a BBC interview.
However, the bank is facing allegations of foreign exchange fraud and has had to set aside as much as £1.25bn for potential fines, an indication that the American Department of Justice is committed to punishing the bank for the misconduct.
Jenkins was on the defense about his bonus and said that the bank has made significant progress and has lowered the operating expenses down to £18bn, a 9% reduction. He was also keen to assert that the bank would not repeat the same mistakes that have forced it to allocate a large amount of money toward the payment of fines, compensation and legal fees.
Barclays incurred a loss of £446 million in the last half of 2014 following the sale of its Spanish corporate business in an ongoing effort to cut down operations. Barclays sold its Spanish retail and corporate banking business to Caixabank last September.
Barclays Forex manipulation
In November 2014, financial regulators in the UK and US imposed fines on six banks that were found to be manipulating foreign exchange rates. The six include Royal Bank of Scotland, JP Morgan Chase, Swiss bank UBS, HSBC, Bank of America and Citi Bank with an ongoing probe into Barclays’ conduct.
Currencies worth over $5tn are traded each day on the foreign exchange markets, significantly more than what is traded on the bond and stock markets. Up to 40% of the global trading happens in London.
While profits from corporate and personal banking increased up by 29% up to £2.89bn and profits from Barclaycard increased by 13% up to £1.34bn, performance in the investment bank was not as impressive. Investment banking profits fell to £1.38bn, a 32% decline in the fiscal year 2014.
According to Chirantan Barua, a Bernstein Research senior analyst said, “Barclays’ investment sector, which was once the profit maker has displayed a much weaker performance than its peers such as Citigroup and Goldman Sachs.”
Following the announcement, Barclay’s shares plunged down to 256.8p a share, a 2.3% decline. Even then, many brokers continue to rate the bank’s stock as a ‘buy’ in spite of the forex manipulation scandal.
Investors’ dividends remained at 6.5p, a 2.7% yield but brokerages anticipate the dividend to climb to 15p, a prospective yield of 5.7% by 2017.
Analysts have given Barclays a buy rating because the company is seen as having positive momentum.
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