Barclays expects H2 2020 to continue to be challenging

Maria Nikolova

Attributable profit for the first half of 2020 was £695 million, sharply down from £2,072 million registered a year earlier.

Barclays PLC (LON:BARC) today posted its financial report for the first half of 2020.

Profit before tax was £1,272 million in the first half of 2020, down from £3,014 million a year earlier. Excluding litigation and conduct, profit before tax was £1,302 million (H119: £3,128m), as positive operating leverage from an 8% increase in income and 3% reduction in operating expenses was offset by materially higher credit impairment charges

Total income increased 8% to £11,621 million. However, Barclays UK income decreased 11% due to ongoing margin pressure, including COVID-19 customer support actions, base rate reductions, lower UK cards interest earning lending (IEL) and overdraft balances, as well as lower income due to the removal of certain fees in overdrafts and UK cards.

Barclays International income increased 16%, with CIB income up 31% and CC&P income down 21%. Within CIB, Markets income increased due to a strong performance across FICC and Equities. Banking fees income increased reflecting a strong performance in debt and equity capital markets, while there was a reduction in Corporate income driven by fair value losses, margin compression and carry costs on hedges. CC&P income decreased primarily as a result of lower balances on co-branded cards and a c.£100m valuation loss on Barclays’ preference shares in Visa Inc.

Credit impairment charges increased to £3,738 million (H119: £928m). This increase primarily reflects £591 million in respect of single name wholesale loan charges and £2.4 billion impact from revised IFRS 9 scenarios reflecting forecast deterioration in macroeconomic variables (including a prolonged period of heightened UK and US unemployment), partially offset by the estimated impact of central bank, government and other support measures.

Attributable profit for the first half of 2020 was £695 million (H119: £2,072m). Excluding litigation and conduct, attributable profit was £710 million (H119: £2,158m), generating a RoTE of 2.9% (H119: 9.4%) and EPS of 4.1p (H119: 12.6p)

Total assets increased to £1,385 billion (December 2019: £1,140bn), primarily due to a £78 billion increase in derivative assets (with a corresponding increase in derivative liabilities), £52 billion increase in cash collateral and settlement balances, and £26 billion increase in financial assets at fair value through the income statement.

The low interest rate environment has resulted in significant decreases in forward interest rate curves which coupled with increased client activity and the appreciation of period end USD against GBP has resulted in rising asset values.

In response to a request from the PRA, and to preserve additional capital for use in serving Barclays customers and clients through the extraordinary challenges presented by the COVID-19 pandemic, the Board agreed to cancel the 6.0p per ordinary share full year 2019 dividend. The Board also decided that for 2020 Barclays would suspend its current capital returns policy and accordingly will not undertake any interim ordinary share dividend payments, regulatory accruals of ordinary share dividends, or share buybacks. The Board will decide on future dividends and its capital returns policy at year-end 2020

Given the uncertain economic outlook and low interest rate environment, Barclays expects the second half of the year to continue to be challenging.

Income in Barclays UK and CC&P is expected to gradually recover from Q220 levels, but certain headwinds including from the low interest rate environment, are likely to persist into 2021.

Impairment in H220 is expected to remain above the level experienced in recent years, but to be below the H120 credit impairment charge assuming no change in macroeconomic forecasts.

In H220 there may be headwinds to the Group’s CET1 ratio from procyclical effects on RWAs, and reduced benefit from transitional relief on IFRS 9 impairment. However, the Group’s CET1 ratio will continue to be managed to maintain an appropriate headroom above the MDA hurdle.

Read this next

Digital Assets

BlackRock bets on crypto bank Silvergate despite drastic fall

BlackRock, the world’s largest asset manager, has increased its stake in Silvergate Bank, a crypto-friendly lender that counts major crypto exchanges like Coinbase and Kraken as clients.

Opinion

A viewpoint from Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, on SEC regulation of the digital asset sector

The SEC’s latest episode comes across as more of a PR performance rather than an act of investor protection.

Digital Assets

Tether denies receiving any loans from Celsius, the opposite is true

World’s largest stablecoin issuer, Tether dismissed reports suggesting that it received a $2 billion loan from the bankrupt cryptocurrency lender Celsius.

Institutional FX

Cboe FX volume makes strong rebound in January

Cboe’s institutional spot FX platform today announced its trading volume for the month ending January 2023, which marks a mild rebound after a steep fall in December.

Uncategorized

XS.com appoints Exness alumni Mohamad Ibrahim as CEO

XS.com, the multi-regulated financial services provider, has appointed Mohamad Ibrahim as the group’s newest chief executive officer (CEO).

Technology

B2Broker Integrates Match-Trader Solution to Expands Its White Label Liquidity Offering

A global provider of technology and liquidity for the FX and cryptocurrency markets, B2Broker recently announced the extension of its white label liquidity offering by merging with Match-Trader.

Digital Assets

UK launches open consultation to regulate crypto exchanges, custody, and lending

The government’s proposed measures have been informed by recent market events – including the failure of FTX – which reinforce the case for effective regulation and sector engagement.

Institutional FX

ViewTrade celebrates record growth with launch of carrying broker services offering

“We have been at the center of the empowerment of the retail investor for decades, supplying the technology to facilitate cross-border access to U.S. markets. Our demonstrated ability to provide a full-service, end-to-end solution to a diverse global customer base continues to prove its value every day.”

Executive Moves

Siege FX names Mathijs Peeters as Head of Distribution Europe, promotes Marek Robertson to CPO

Siege will soon be connected with 10 of the largest 20 Banks and 15 of the top 20 Asset Managers.

<