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(Alliance News) - Barclays said Thursday profit rose by a quarter in 2019 but the bank warned that hitting its return on tangible equity target has become more challenging.
Barclays separately said Chief Executive James Staley is being unanimously recommended for re-election at the bank's annual general meeting, having been judged to have been "sufficiently transparent" about the nature of his relationship with Jeffrey Epstein.
Epstein killed himself in a New York jail in August while awaiting trial on sex-trafficking charges.
The board will continue to "cooperate fully" with the Financial Conduct Authority and Prudential Regulation Authority investigation in the UK, Barclays said. The probe is into "Staley's characterisation to the company of his relationship with Mr Epstein and the subsequent description of that relationship in the company's response to the FCA".
Total income rose 2% to GBP21.63 billion in 2019, with net operating income broadly flat at GBP19.72 billion. Total operating expenses fell 5% to GBP15.43 billion, helped as litigation & conduct costs were reduced by 16% to GBP1.85 billion.
As a result, pretax profit rose 25% to GBP4.36 billion.
The bank's common equity tier 1 ratio strengthened to 13.8% in 2019 from 13.2% in 2018. Return on tangible equity improved year-on-year to 9.0% versus 8.5% in 2018. Barclays said it continues to target a RoTE above 10%.
"However, given global macroeconomic uncertainty and the current low interest rate environment, it has become more challenging to achieve this in 2020. Notwithstanding these headwinds, the group believes it can achieve a meaningful improvement in returns in 2020," the bank said of its RoTE target.
Barclays's total dividend for the year was raised to 9.0p per share from 6.5p.
"With continued strong capital generation and a CET1 ratio of 13.8%, we are pleased to be able to deliver improved returns to shareholders, and have declared a total dividend of 9 pence per share - up from 6.5p in 2018, and three times that of 2017," said CEO Staley.
"We expect future earnings to drive increased returns to shareholders, as we anticipate a significant reduction in charges related to litigation and conduct from this year onwards," Staley continued. "We intend to pay a progressive ordinary dividend supplemented with additional cash returns to shareholders, including share buybacks, as and when appropriate."
Barclays shares were down 2.8% in early trade Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.9% at 7,466.09
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Hang Seng: down 0.4% at 27,720.44
Nikkei 225: closed down 0.1% at 23,827.73
DJIA: closed up 275.08 points, 0.9%, at 29,551.42
S&P 500: closed up 0.7% at 3,379.45
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GBP: down at USD1.2956 (USD1.2975)
EUR: down at USD1.0876 (USD1.0894)
Gold: up at USD1,573.61 per ounce (USD1,566.10)
Oil (Brent): firm at USD55.64 a barrel (USD55.55)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
0930 GMT UK Finance mortgage figures
1000 CET France IEA oil market report
0830 EST US consumer price index
0830 EST US real earnings
0830 EST US unemployment insurance weekly claims report - initial claims
1030 EST US EIA weekly natural gas storage report
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China's official death toll and infection numbers from a new coronavirus spiked dramatically on Thursday after authorities changed their counting methods, fuelling concern the epidemic is far worse than being reported. Two top-ranking politicians overseeing the epicentre of the outbreak were also sacked, adding to questions over China's handling of the crisis, just hours after President Xi Jinping claimed "positive results" in battling the outbreak. The World Health Organization also quickly countered Chinese reassurances that the epidemic, which has now officially killed more than 1,350 people in China, would peak in a matter of weeks.
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It is too early to tell the economic toll from the virus outbreak in China, but the hit to global growth should be "mild," International Monetary Fund Chief Kristalina Georgieva said. The IMF is expecting a "V-shaped impact," with a sharp decline in activity in China followed by a sharp recovery, meaning there likely will only be a "mild impact on the rest of the world," Georgieva said on CNBC. But she cautioned: "It is still too early to make projections," and the global economy is "somewhat less strong" than it was when China faced the SARS virus epidemic in 2003. "China was different, the world was different. This virus is clearly more impactful and the world economy then was very strong," she said. The IMF projects China's economy will grow 6.0% this year, compared to 10% in 2003.
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The US has seen steady job gains that have beat expectations and lasted longer than expected, but Federal Reserve Chair Jerome Powell acknowledged Wednesday that all is not well. Wage gains have remained sluggish, while Americans lag workers in other advanced economies in education and skills, the amount of people in the work force and the cost of health care, Powell told senators. And the number of people working more than one job is at "a very, very high level right now," Powell said. In two days of testimony to Congress, the Fed chief was upbeat about the economy, which is experiencing a record eleventh year of growth, but he noted the chink in an otherwise healthy picture.
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German consumer prices contracted month-on-month as expected in January, Destatis said. Consumer prices were up 1.7% year-on-year but were down 0.6% on the prior month, confirming the provisional estimate. In December, annual inflation was confirmed at 1.5% and monthly inflation at positive 0.5%. The harmonised index of consumer prices - calculated for the European Central Bank - rose 1.6% in January on a year earlier and fell 0.8% on the prior month.
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BROKER RATING CHANGES
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BERENBERG CUTS CRODA INTERNATIONAL TO 'HOLD' ('BUY') - TARGET 5100 PENCE
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JEFFERIES CUTS BEAZLEY TO 'HOLD' ('BUY') - TARGET 611 (616) PENCE
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GOLDMAN CUTS LEARNING TECHNOLOGIES TO 'NEUTRAL' ('BUY') - TARGET 162 PENCE
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COMPANIES - FTSE 100
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British Gas parent Centrica said a "challenging environment" hit earnings in 2019. Revenue fell to GBP22.67 billion from GBP23.30 billion in 2018, as the company sank to a pretax loss of GBP1.10 billion from a GBP575 million profit the year before. The firm said it took a net exceptional charge before tax of GBP1.10 billion, including impairments of E&P and Nuclear assets, predominantly due to a reduction in commodity price forecasts, and restructuring costs of GBP356 million. The full-year dividend was slashed by 58% to 5.0p, in line with July's rebasing decision. "2019 operating profit and earnings were materially impacted by a challenging environment, most significantly the implementation of the UK default tariff cap and falling natural gas prices," said Chief Executive Ian Conn, adding: "As expected, performance during the second half was much improved compared to the first half, demonstrating momentum as we enter 2020."
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Delivery Hero said it entered into an agreement to buy 8.4 million shares in new food delivery tie-up Just Eat Takeaway.com. The share purchase agreement means the German takeaway firm effectively will restore its 11% stake in Just Eat, which was diluted by the London-listed company's merger with Dutch peer Takeaway.com. Back in October, Takeaway.com called on Delivery Hero to abstain from a vote on the Dutch firm's takeover of Just Eat, citing a conflict of interest due to Delivery Hero's links with Prosus NV. Prosus, listed in Johannesburg and Amsterdam, made a rival bid to acquire Just Eat.
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COMPANIES - FTSE 250
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Domino's Pizza Group said it has agreed to sell its Norwegian business to Pizza Holding and EYJA Fjarfestingafelag III, the existing minority shareholders in Domino's Norway. Domino's Pizza will sell its 71% stake for consideration comprised of a nominal payment of NOK1 in cash and the transfer of the minority shareholders' interest in Domino's Sweden, which will result in Domino's Pizza owning 100% of the Swedish operations. This transfer should facilitate an "an orderly exit" from the Swedish operations in due course, said Domino's Pizza, and "simplify" the disposal of the business. In the event that shareholder approval for the deal is not obtained at an early May general meeting, Domino's Pizza will pay the minority shareholders a GBP1 million break fee. It said the deal had the back of brand owner Domino's Pizza in the US and of the full board of the UK company. Domino's Norway made an underlying operating pretax loss of GBP6.6 million in 2018.
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COMPANIES - OTHER MAIN MARKET AND AIM
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South32 said its earnings plummet in the first half of its current financial year amid lower selling prices for its key commodities. The Perth, Australia-based miner reported pretax profit of USD187 million for the six months to the end of 2019, compared to USD870 million a year earlier, as revenue declined by 16% to USD3.22 billion from USD3.81 billion. The company said earnings suffered from "volatile" macroeconomic conditions which hurt the prices of key commodities and resulted in a temporary increase in underlying effective tax rate. South32 said it will pay an interim dividend of 1.1 US cents in addition to a special distribution of a further 1.1 cents. A year ago, the company paid a 5.1 cents a share interim dividend and 1.7 cents special payout.
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COMPANIES - INTERNATIONAL
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Swiss foods giant Nestle has reached its profitability target a year early, it said, with growth in the US particularly strong. Nestle has a large range of brands across a number of food and drinks groups, including KitKat chocolates, Nescafe and Nespresso coffee, Haagen-Dazs ice cream, and Felix cat food. Nestle's profit before tax and joint ventures for 2019 was CHF15.06 billion, 16% higher than the year before. Earnings per share were 28% higher at CHF4.30, and the underlying figure up 9.8% to CHF4.41. The underlying trading profit margin improved 60 basis points to 17.6%, Nestle continued, though the reported margin fell 30 basis points to 14.8% due to restructuring costs.
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Credit Suisse reported a rise in annual profit, but growth was held back by a poor performance from its investment bank. For 2019, Credit Suisse recorded pretax income of CHF4.72 billion, sharply higher than the CHF3.37 billion seen in 2018. Net income attributable to shareholders rose 69% year on year in 2019 to CHF3.42 billion. Net revenue rose 7% to CHF22.48 billion from CHF20.92 billion. Wealth Management revenue rose 9% year on year to CHF14.40 billion. Investment Banking & Capital Markets revenue, however, slipped 25% year on year to CHF1.68 billion. Credit Suisse blamed fewer merger & acquisition completions and lower debt underwriting client activity. Last week, Credit Suisse Chief Executive Tidjane Thiam handed in his resignation. He will step down on Friday. Thomas Gottstein, who has been with Credit Suisse for more than 20 years, has been appointed as the new CEO. He is currently CEO of Credit Suisse (Switzerland).
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European aerospace and defence giant Airbus has slipped into the red after paying billions in fines over corruption allegations, the company said. In 2019, Airbus incurred a consolidated net loss of EUR1.36 billion, the group said, on revenue of EUR70.49 billion. In 2018, net profit had been EUR3.05 billion and revenue EUR63.71 billion. The Toulouse-headquartered aircraft manufacturer had agreed to pay EUR3.6 billion in fines after bribery and corruption investigations in France, Britain and the US, following a deal with authorities.
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Love is not in the air on Facebook for the time being, after the social network decided to postpone the launch of its dating service in the UK. The tech giant was planning to introduce a Tinder rival to users across Europe ahead of Valentine's Day but ran into issues with its lead EU regulator, the Irish Data Protection Commission. Facebook Dating is an opt-in feature which allows users to create a separate dating profile to their existing Facebook account, with the site then offering recommendations based on preferences, things in common with other users of the tool, and any mutual friends. The service was first tested in Colombia in September 2018 before expanding to other locations including the US a year later.
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Thursday's Shareholder Meetings
Paragon Banking Group
GCP Infrastructure Investments
Watkin Jones
Tritax Eurobox
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By Tom Waite; thomaslwaite@alliancenews.com
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