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LONDON (Alliance News) - Barclays PLC on Thursday reported a drop in profit, missing consensus, and announced it has set aside an additional GBP150 million to deal with the impact of the "economic uncertainty" in the UK.
Barclays also raised its dividend and pledged a greater focus on returns to shareholders.
Shares in the FTSE 100-listed lender were up 0.3% at 161.38 pence each. The stock is down 20% in the past 12 months but is up 7.4% so far in 2019.
Barclays credit impairment charges in 2018 were reduced 37% to GBP1.47 billion, with the lender attributing this to "prudent management" of credit risk. Barclays ended 2018 with risk-weighted assets of GBP311.9 billion, down from GBP313.0 billion in 2017.
The significant drop credit impairments was offset by Barclays taking a GBP150 specific charge in the fourth quarter to combat the economic uncertainty caused by the UK's continuing negotiations with the EU over Brexit.
The lender also confirmed its Irish subsidiary received an extended banking licence in the fourth quarter, allowing Barclays to transfer assets to the subsidiary as part of the bank's plans to expand its Irish business following the UK's departure from the EU.
Pretax profit for 2018 came in at GBP3.49 billion, slightly lower than the GBP3.54 billion achieved in 2017. This included litigation and conduct charges of GBP2.2 billion, which the bank said was principally related to a GBP1.4 billion settlement with the US Department of Justice.
Excluding these charges, pretax profit for the year was up 20% on 2017 to GBP5.7 billion.
Analysts had expected pretax profit at GBP5.83 billion.
Net interest income came in at GBP9.06 billion, down from GBP9.85 billion the year before, though a 30% increase in net trading income boosted total income to GBP21.14 billion from GBP21.08 billion year-on-year. The consensus forecast for total income in 2018 had been GBP21.02 billion.
Barclays's common equity tier 1 ratio was 13.2% at the end of 2018, slipping slightly from 13.3% at the end of 2017. Analysts had forecast the bank's CET1 ratio to come in at 12.9%.
In the fourth quarter, Barclays pretax profit decreased dramatically to GBP374 million from GBP1.46 billion in the third quarter. Year-on-year, however, the bank's fourth quarter profit multiplied from GBP93 million recorded in 2017.
An increase in total operating expenses in the fourth quarter explains the decrease from the third quarter and a tripled credit impairment charge.
In the three month period, net interest income decreased 3.8% to GBP2.30 billion. Compared to the fourth period in 2017, net interest income increased 1.3%.
Barclays declared a full-year dividend of 4.0 pence, bringing its total dividend to 6.5p. This is more than double the 3p paid out in respect of 2017.
"In 2018, based on our strong capital generation, Barclays restored the dividend to 6.5p and redeemed expensive preference shares dating from the financial crisis. This is excellent progress, but not sufficient," said Chief Executive James Staley.
Within the divisions, the Barclays UK business - which includes retail and business banking - saw a 12% increase in pretax profit in 2018 to GBP1.96 billion from GBP1.75 billion. The unit's net interest income decreased 1.0% to GBP6.03 billion. The increase in profit can be attributed to a 5.2% decrease in total operating expenses to GBP4.60 billion.
Barclays UK's net interest margin ended 2018 at 3.23%, down from 3.49% at the end of 2017.
Barclays UK loans and advances to customers increased 2.1% to GBP187.6 billion with customer deposits increasing 2.0% to GBP197.3 billion.
The Barclays International unit posted a 15% increase in pretax profit to GBP3.78 billion from GBP3.28 billion in 2017. The unit's net interest income decreased 11% to GBP3.82 billion, but the sharp rise in profit can be attributed to the unit's credit impairment charges more than halving to GBP658 million.
Within Barclays International sits Barclays investment bank. In 2018 the investment bank recorded a 26% pretax profit increase to GBP2.59 billion. The investment bank's income increased 8.9% to GBP4.90 billion.
The fixed income, currencies and commodities segment reported a slight drop in income to GBP2.86 billion, but the equities segment posted a 25% income rise to GBP2.04 billion.
In the fourth quarter alone, however, the investment bank's pretax profit dropped to GBP85 million from GBP498 million in the third quarter. Both the FICC segment and equities segment saw a drop in income compared to the previous quarter.
"Going forward the principal calls on future earnings should now be returns to shareholders and investing to grow the business. We will use the strong capital generation of the bank to return a greater proportion of those earnings to shareholders by way of dividends and to supplement those dividends with additional returns, including share buybacks. I am optimistic for our prospects to do more in 2019 and beyond," said Staley
Barclays said it continues to target a return on tangible equity of greater than 9% for 2019, and above 10% for 2020. This compares to the RoTE of 8.5% achieved for 2018.
The bank continues to aim for operating expenses in a range of GBP13.6 billion to GBP13.9 billion for 2019. Operating expenses were GBP13.9 billion in 2018.
"The group's 2018 results reflect good progress towards these targets," said Barclays.
