Barclays' share price is lower on the back of the news that Jes Staley, the CEO, had connections to the disgraced financier Jeffery Epstein.
Profit beats forecasts
The story overshadowed the bank’s full-year figures. Profit-before-tax was £6.2 billion, topping forecasts, while the statutory profit was £4.4 billion. Group income edged up by 2% to £21.6 billion, and costs slipped by 2% to £13.6 billion. The firm is aiming to achieve a return on tangible equity in excess of 10%, but it has cautioned that has become more "challenging".
Staley pay hike amid Epstein link
Jes Staley, the bank CEO, is cooperating with the regulatory bodies over his historic relationship with Jeffrey Epstein. Mr Staley had a professional relationship with Mr Epstein from his days at JPMorgan’s private bank – where Mr Epstein was a client. Jes Staley has been "open" and "transparent’ with the regulator, but the connection doesn’t help his reputation or Barclays'. This morning it was confirmed that Mr Staley's pay packet for the year jumped to £5.9 million from £3.36 million. The timing of the generous rise isn’t great in light of the Epstein story.
The London-listed finance house confirmed that banking income was stable, but it's worth noting that net interest income slipped by 2% – which isn’t a shock given the low interest environment. The lending unit is likely to remain under pressure for the foreseeable future, given what’s going on in bond yields. Income from trading fixed income, currencies and commodities (FICC) jumped by 17%, but on the other hand, income from equities fell by 7%. It is important that Barclays don’t fall back into the bad habit of depending too heavily on trading the financial markets, as the business is more volatile than traditional banking services.
Barclays share price boost
The Barclays share price has had a couple of nice boosts in recent months. The well received third-quarter figures in late October, as well as the UK election result, jolted the stock higher. For the third quarter, equity analysts were expecting pre-tax profit to be £1.5 billion, but it come in at £1.8 billion. Many banks have seen an uptick in revenue derived from trading the financial markets, and Barclays was one of the better performers from a European point of view. The closely-watched FICC metric jumped by 19%.
Barclays confirmed that it took a hit for the mis-selling of payment protection insurance (PPI) to the tune of £1.4 billion. The announcement wasn’t a surprise seeing as the bank made provision of that approximate size last month. The government-imposed deadline to claim compensation for PPI was the end of August 2019, so there was a surge in last-minute applications. One would imagine we have heard the last of PPI, but stranger things have happened.
UK election boost
Barclays' share price also jumped in mid-December on the back of the large Conservative party UK general election win. Not only were traders happy the pro-business Tory party won the election, the defeat of the Corbyn-led Labour party crushed any chatter about the possibility of capital flight out of the UK. The big majority held by the Conservative party means there should be more decisive government, and in turn Boris Johnson shouldn’t have any issues pushing through his pro-business policies – which should help the economy, as well as Barclays.