Last checked at 
(Alliance News) - Barclays PLC on Thursday reported a sharp rise in annual profit on significantly lower costs, as the lender backed Chief Executive Jes Staley despite his relationship with Jeffrey Esptein.
Shares in the FTSE 100-listed lender were down 2.7% in early trading in London at 174.58 pence each.
Barclays also upped its annual dividend to 9.0 pence, 38% higher than the 6.5p distributed in 2018.
In 2019, the lender recorded pretax profit of GBP4.36 billion, 25% higher than the GBP3.49 billion seen in 2018. Market consensus compiled by Barclays saw pretax profit at GBP6.41 billion.
Excluding litigation costs, pretax profit was GBP6.21 billion, up 9% year-on-year.
Barclays total operating expenses fell 5% to GBP15.43 billion from GBP16.24 billion, with conduct & litigation costs decreasing 16% year-on-year to GBP1.85 billion.
Barclays was forced to take a GBP1.4 billion payment protection insurance provision in 2019.
As a result, the lender's cost-to-income ratio improved to 71% in 2019 from 77% the year before. Market forecasts were predicting 63%.
Excluding litigation costs, Barclays cost-to-income ratio was 63%.
Net operating income was broadly flat in 2019 at GBP19.72 billion compared to GBP19.67 billion in 2018. Market consensus forecast GBP19.61 billion.
Total income was up 2% to GBP21.63 billion from GBP21.14 billion.
"2019 was another year of progress for Barclays, continuing the positive momentum across our business and allowing us to increase returns to shareholders," Staley said.
He continued: "Disciplined cost management and income growth resulted in a cost: income ratio of 63%, excluding litigation and conduct, and we saw positive jaws across all operating businesses, allowing us to continue investment in our service to customers and clients, including future growth opportunities, as well as improving profitability."
The lender ended 2019 with a CET1 ratio of 13.8%, up from 13.2% the year before.
Within units, Barclays UK pretax profit fell 48% to GBP1.02 billion on a 2% slip in net interest income to GBP5.89 billion and a sharp rise in litigation costs, related to PPI charges.
Consensus forecast had Barclays UK's 2019 pretax profit at GBP2.51 billion.
The lender's domestic retail and commercial bank ended 2019 with a loan book totalling GBP193.7 billion, up 3.3% on the year before. Barclays UK's net interest margin rate was 3.09% in 2019, down from 3.23% in 2018.
Barclays International saw pretax profit rise 9% to GBP4.12 billion as net interest income grew 3% to GBP3.94 billion and net operating income added 1% to GBP13.51 billion - in line with market consensus.
The lender's Corporate & Investment Bank, which sits within Barclays International, saw pretax profit rise 14% to GBP2.96 billion, as Markets income rose 7%.
The other half of Barclays International - Consumer, Cards & Payments, which covers the US retail and commercial banking arm - reported a 2% slip in profit to GBP1.16 billion. The unit's loan book was flat at GBP40.8 billion.
Looking forward, Barclays said it continues to target a return on tangible equity in excess of 10%.
"We continue to believe that it is appropriate to target a return greater than 10%, and we are managing our business to achieve that. However, given the low interest rate environment, it has become more challenging to achieve that target in 2020. Nonetheless, Barclays is confident of further improving returns meaningfully this year," Staley said.
He added: "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. We intend to pay a progressive ordinary dividend supplemented with additional cash returns to shareholders, including share buybacks, as and when appropriate."
The lender noted its directors, including Staley, will be putting themselves up for re-election as its AGM next month - in line with UK Corporate Governance Code.
Barclays said it is aware of the media reports over the past six months that have "highlighted historical links between Staley and Jeffrey Epstein".
Barclays said: "As has been widely reported, earlier in his career Staley developed a professional relationship with Epstein. In the summer of 2019, in light of the renewed media interest in the relationship, Staley volunteered and gave to certain executives, and the chair, an explanation of his relationship with Epstein. Staley also confirmed to the board that he has had no contact whatsoever with Epstein at any time since taking up his role as Barclays Group CEO in December 2015."
Barclays also noted the relationship between Staley and Epstein was the subject of a UK Financial Conduct Authority enquiry.
"The FCA and the Prudential Regulation Authority subsequently commenced an investigation, which is ongoing, into Staley's characterisation to the company of his relationship with Epstein and the subsequent description of that relationship in the company's response to the FCA," Barclays added.
Based on the available information, Barclays said it retains "full confidence" in Staley and will be unanimously recommending him for re-election.
By Paul McGowan; paulmcgowan@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
