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Barclays's strong results overshadowed by Epstein probe

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Barclays’ full-year results beat market forecasts for profit, revenue, and return on tangible equity. (Seth Wenig/AP Photo)

Barclays (BARC.L) reported better-than-expected 2019 results on Thursday, but the figures were overshadowed by news its chief executive is being investigated over links to disgraced financier Jeffrey Epstein.

Barclays’s full-year results beat market forecasts for profit, revenue, and return on tangible equity, a key measure of banking performance.

However, shares fell over 2.5% in early trade after the bank also disclosed a probe by regulators into chief executive Jes Staley. Watchdogs are investigating Staley’s links to convicted sex offender Jeffrey Epstein, who died in custody last year.

Read more: Barclays CEO probed over Jeffrey Epstein links

That news overshadowed an otherwise strong set of numbers. Revenue at Barclays rose 2% to £21.6bn ($28bn) in 2019, slightly above market forecasts of £21.5bn. Pre-tax profit rose 9% to £6.2bn, against analyst expectations of £6bn.

Barclays’s return on tangible equity was 9% for 2019, which was higher than forecasts. Barclays had been targeting return on tangible equity of above 9% for 2019, although the bank warned last October that hitting this goal could be difficult.

“2019 was another year of progress for Barclays, continuing the positive momentum across our business and allowing us to increase returns to shareholders,” Staley said in a statement.

The bank increased its total dividend to 9p, up from 6.5p in 2018, and reiterated its goal of paying “progressive” dividends.

Barclays faced pressure last year from activist investor Edward Bramson to spin-off its investment bank, which Bramson believed was dragging down the wider group.

Read more: Edward Bramson suffers heavy defeat in Barclays battle

Staley, an investment banker by trade, resisted the calls and on Thursday said his strategy had paid off.

“Barclays is a British universal bank, with a well-balanced mix of consumer and wholesale businesses, across geographies and currencies,” Staley said in a statement. “This helps us deliver year-on-year improvements in profitability during a period of macroeconomic uncertainty.”

Barclays CEO Jes Staley said the results proved he was right to defend Barclays's investment bank. (Evan Agostini/Invision/AP)

Income at the investment and corporate banking division rose by 5% to £10.2bn and pre-tax profit rose 15% to £3.1bn.

Staley said Barclays was still targeting return on tangible equity of more than 10% this year but cautioned the goal could be difficult to achieve.

“Given the low interest rate environment, it has become more challenging to achieve that target in 2020,” he said. “Nonetheless, Barclays is confident of further improving returns meaningfully this year.”

Conduct costs have weighed on Barclays in recent years and the bank suffered a loss attributable to shareholders in the third quarter due to the cost of payment protection insurance (PPI) mis-selling.

Read more: Barclays counts cost of PPI and warns outlook 'more challenging'

Barclays said it had not made any additional provisions to cover PPI claims and Staley said: “We anticipate a significant reduction in charges related to litigation and conduct from this year onwards.”

“Looking ahead, we will extend our customer reach by using our current strengths ⁠— our brand, our existing digital proposition, our universal banking model, and leading market positions,” Staley said.

He promised more innovation at the bank.

“In this way, we will invest for growth in areas that are less capital intensive, further diversifying the Group without limiting our commitment to the businesses we already have,” Staley said.