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(Alliance News) - Barclays PLC on Wednesday reported a sharp drop in first quarter profit as the lender was forced to dramatically increase its credit impairments to handle the Covid-19 pandemic.
Barclays also noted it will decide on future dividends and its capital returns policy at the end 2020, following the cancellation of its shareholder payouts following guidance from regulators in the UK.
"Barclays is committed to supporting its customers, clients and the UK economy through the crisis. Despite the macroeconomic downturn caused by the Covid-19 pandemic, the group's position remains robust, reflecting our diversified business model," Chief Executive Jes Staley said.
In the three months to March 31, the lender recorded pretax profit of GBP913 million, 38% lower than the GBP1.48 billion seen in the first quarter of 2019.
Credit impairments in the quarter jumped to GBP2.12 billion from GBP448 million the year before.
Barclays's total operating expenses were flat year-on-year at GBP3.25 billion.
Net operating income was down 13% year-on-year to GBP4.17 billion compared to GBP4.80 billion. Total income was up 20% to GBP6.28 billion from GBP5.25 billion.
As a result, the lender's cost-to-income ratio improved to 52% in the first quarter from 63% the year before.
Staley said Barclays's return on tangible equity was "resilient" in the quarter, recording 5.1%, down from 9.2% the year before.
Staley added: "An event like the Covid-19 pandemic makes everyone focus on what's really important right now. For us, that means running the bank safely and soundly, helping our customers and clients through the difficulties they face, supporting the UK economy and the communities where we live and work, and taking care of our colleagues around the world."
He added: "The impact of Covid-19 came late in what was until that point a good quarter."
The lender ended the first quarter with a common equity tier 1 ratio of 13.1%, up from 13.0% the year before, but down from 13.8% at the end of 2019.
Within units, Barclays UK pretax profit fell 67% to GBP195 million on a 4.1% slip in net interest income to GBP1.41 billion and a sharp rise in credit impairment charges.
The bank's domestic retail and commercial bank ended the quarter with a loan book totalling GBP195.7 billion, up 4.4% on the year before. Barclays UK's net interest margin rate was 2.91% in the period, down from 3.18% the year before.
Barclays International saw pretax profit fall 27% to GBP822 million, but net interest income grew 11% to GBP998 million and net trading income doubled to GBP2.36 billion. Barclays International net operating income, however, slipped 15% to GBP3.04 billion - due to a jump in credit losses.
The lender's Corporate & Investment Bank, which sits within Barclays International, saw pretax profit rise 45% to GBP1.20 billion, as Markets income rose 78% to GBP2.42 billion - the best ever quarterly performance.
The other half of Barclays International - Consumer, Cards & Payments, which covers the US retail and commercial banking arm - reported a GBP381 million loss. This was blamed on increased credit impairment charges.
Looking forward, Barclays said it expects the rest of 2020 to be "challenging" but continues to target a return on tangible equity in excess of 10%.
Staley added: "Despite all the challenges we face as a consequence of Covid-19, I am confident Barclays will emerge from this pandemic, well placed to continue to serve our customers and clients, the communities and economies in which we operate, and our shareholders."
By Paul McGowan; paulmcgowan@alliancenews.com
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