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(Alliance News) - Barclays PLC on Wednesday said it recognises that there is "more work to do" on shareholder returns, but the London-based bank reassured investors that it is well-placed to avoid getting caught up in the banking industry crisis that started in the US.
"The last year or so has seen a continuing absence of what we used to think of as normality, in both the macroeconomic and the geopolitical environments. All of these factors have an impact on the operations of a significant global bank like Barclays," said Chair Nigel Higgins.
Higgins was addressing the bank's annual general meeting, to which normality had returned for the first time since since 2019, before the Covid-19 pandemic, he noted.
Higgins said there has been "considerable upheaval in banking in the last few months", referring to the collapse of three US banks and the forced takeover of Credit Suisse Group AG. The Barclays board has spent "considerable time examining these developments, considering contagion risks, and seeking to ensure that none of the mistakes made in these cases are repeated at Barclays," he said.
Higgins reassured investors that the management team is "firmly of the view" that they have managed the risks that undermined those other banks.
"Our liquidity management is more robust than seems to have been the case in some of these situations. Our stress tests have frequently incorporated materially higher interest rate scenarios of the type we have recently witnessed. We also have a profitable business model, returning over 10% in each of our business lines and at group level," Higgins explained.
However, Higgins argued the Barclays share price is at an "unsatisfactory" level. The stock was down 1.9% to 152.00 pence each in London on Wednesday afternoon and essentially flat over the past 12 months.
To change this, he said Barclays must ensure it continues with shareholder returns "over and above" its current level. It said that it is doing this at present and operating within its target range for capital.
Higgins said the board "are very focused on the question of shareholder returns". This may take form in dividends and share buybacks, he said.
"Secondly, to avoid the kind of error which cost us so much money last year when we failed to properly operate within the limit set for securities that we were issuing in the United States. Under the guidance of the board, the management has launched a change programme, alongside our 'purpose, values and mindset', to set a standard of consistent excellence, ensuring that we are holding ourselves to that standard in all that Barclays does, whether simple or complex. This is a very material endeavour, backed by significant investment, and we will demonstrate measurable progress to you, our shareholders, in a transparent and regular way," Higgins added.
In March 2022, Barclays revealed that securities offered and sold under its US shelf registration statement for an approximate one-year period had exceeded a registered amount. This, the bank explained, gave the purchasers of the affected securities a right of rescission, requiring Barclays to repurchase the affected securities at their original purchase price.
Under US banking rules, Barclays was allowed to sell over a three-year period USD20.8 billion worth of structured notes that track equities and exchange traded notes that track commodity prices and offer debt-related trades. But Barclays admitted it sold USD15 billion dollars worth of products more than it was allowed to under regulations agreed with the US Securities & Exchange Commission.
This mistake cost Barclays GBP450 million.
What's more, in September 2022, large Wall Street firms agreed to pay USD1.8 billion in fines over failures to keep electronic records such as text messages between employees on personal mobile phones.
Barclays, Bank of America Corp, Deutsche Bank AG and Goldman Sachs Group Inc were among the firms that agreed to fines over "longstanding failures" to maintain and preserve electronic communications that must be available to regulators in the course of oversight, the US SEC said. Barclays had agreed a USD200 million settlement.
Barclays was then hit by a GBP50 million fine in October 2022, from the UK's financial watchdog over failures to disclose arrangements with Qatari investors when it raised funds during the 2008 financial crash.
Late last month, Barclays said it had performed well in the first quarter of 2023. It reported pretax profit of GBP2.60 billion, up 16% from GBP2.23 billion a year prior. Profit before impairment rose to GBP3.1 million from GBP2.4 million a year ago. Total income amounted to GBP7.24 billion, up 11% from GBP6.50 billion.
Barclays' return on tangible equity was 15.0%, compared with 11.5% in the same quarter a year prior. Its CET1 ratio was 13.6% at the end of March, down from 13.9% at the end of December.
By Sophie Rose, Alliance News reporter
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