Barclays reports profit decline after suffering a costly trading error in the United States

Barclays Bank branch in London, Britain, February 23, 2022.

Peter Nichols | Reuters

Barclays Thursday saw a drop in second-quarter profit after taking a large provision related to a costly trading error in the US

The British bank announced a net profit of 1.071 billion pounds ($1.30 billion) attributable to shareholders, meeting expectations of 1.085 billion pounds expected by analysts, according to Refinitiv. However, it recorded a 48% decrease from the same period the previous year.

Barclays has filed lawsuits and is taking £1.9 billion for the first half of the year, including a £1.3 billion cost related to what the bank calls “over-issuance of securities” in the US

The British bank announced earlier this year that it had sold $15.2 billion more US investment products – known as structured securities – than was permitted.

According to the bank, the £1.3 billion litigation and conduct fees booked in the second quarter were largely offset by the hedging, which brought in £758 million in income.

They include the cost of repurchasing excess banknotes and a £165m cash penalty from the SEC.

These fees, combined with the appreciation of the dollar against the British pound, have led Barclays to increase its forecast operating expenses for the full year to 16.7 billion pounds from the previous forecast of 15 billion pounds.

Other highlights from this quarter include:

  • Group revenue is up to £6.7 billion, from £5.4 billion a year earlier.
  • CET 1, a measure of bank solvency, came in at 13.6%, down from 13.8% in the first quarter.
  • Operating expenses totaled £5 billion, up from £3.7 billion in the second quarter of 2021.
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Barclays shares will start trading Thursday down more than 15% for the year amid broader concerns about interest rates, inflation and slowing growth.

CEO CS Venkatakrishnan (commonly known as Venkat) said the bank had a “strong first half” with group income increasing by 17% and return on tangible equity by 10.1%.

“The broad-based income growth we had in the first quarter continued across all three operating companies into the second quarter,” Venkat said.

“Our performance in the first half shows the resilience and advantage that diversification brings at all levels, both across the bank and within our business.”

Venkat took over the bank in November 2021 after longtime CEO Jes Staley resigned following an investigation by regulators into his relationship with Jeffrey Epstein.

This is a breaking news story and will be updated soon.

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