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(Alliance News) - Barclays PLC on Friday posted a record quarterly profit figure as credit impairment charges were reduced, but saw income drop following a disappointing period for the cards and UK businesses.
Shares in the blue chip lender were down 5.7% in London on Friday morning at 177.90 pence each - making it one of the worst performers in the FTSE 100.
Pretax profit was a "record" GBP2.40 billion for the first quarter of 2021, up sharply from GBP913 million a year ago.
Credit impairment charges were cut by 97% to GBP55 million from GBP2.12 billion.
"The low credit impairment charge was driven by reduced unsecured lending balances, no material single name wholesale loan charges and limited portfolio deterioration," the lender explained.
Total income fell 6% to GBP5.90 billion from GBP6.28 billion, as net interest income plunged 21% to GBP1.85 billion from GBP2.33 billion. Net fee, commission & other income grew 2% year-on-year to GBP4.05 billion from GBP3.95 billion.
The bank's high street division had a mixed period as the recent lockdowns reduced consumer spending, but the stamp duty holiday continued to help the housing market and its mortgage division.
Barclays UK income fell 8% to GBP1.58 billion as the unit's net interest income dropped 9% on its net interest margin worsening to 2.54% from 2.91% a year before.
Personal Banking income was down 5% and Barclaycard Consumer UK income sunk 28%, hurt by reduced borrowing and spend levels by customers resulted in a lower level of interest earning lending balances.
Turning to its Consumer, Cards & Payments business - which sits within Barclays International - income was down a mammoth 22% to GBP805 million - reflecting lower cards balances and reduced payments activity.
The other half of Barclays International, the lender's Corporate & Investment Bank was the lone bright spot, seeing income slip 1% to GBP4.40 billion. Markets income decreased 12% as its Equities business reported its best ever quarter on a comparable basis, but was offset by the Fixed Income, Currencies, Commodities business.
"As was the case throughout 2020, within Barclays International, performance in the CIB was strong this quarter, achieving a return on tangible equity of 17.9% on income of GBP3.6 billion, just 1% down from our first quarter income performance last year, which was a very strong comparative. It also partially offset challenges in our consumer businesses that have been impacted by lower spend and activity levels as a result of the pandemic," said Chief Executive Jes Staley.
Barclays group total operating expenses rose to GBP3.58 billion from GBP3.26 billion, resulting in its cost-to-income ratio rising worsening to 61% from 52%.
The bank ended the quarter with a loan book of GBP345.8 billion, down from GBP374.1 billion at the same point the year before, but up from GBP342.6 billion at the end of December.
Barclays customer deposits stood at GBP498.8 billion compared to GBP470.7 billion the year before.
The bank ended the period with a CET1 ratio of 14.6% versus 13.1% the year before.
For the year ahead, Barclays said the outlook remains uncertain due to the pandemic but expects to deliver "meaningful" year-on-year improvement in RoTE in 2021. Over the medium term the bank is targeting a RoTE of greater than 10%.
In the first quarter, RoTE was 14.7%.
The bank noted the headwinds to income for its Barclays UK unit are expected to persist in 2021.
The full-year impairment charge is expected to be "materially below" than of 2020's due to an improved economic outlook in the latter part of the first quarter - and if this persists, Barclays would expect to reduce the impairment provision level.
"While evidence of recovery is encouraging, we have continued to take a cautious view of the impact of the pandemic on the business. We remain disciplined on costs, with a cost to income ratio of 61% this quarter. Our capital position remains well above target with a CET1 ratio of 14.6% and we completed our GBP700m buyback this month. We will give further guidance on distributions when appropriate," said Staley.
By Paul McGowan; paulmcgowan@alliancenews.com
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