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LONDON (Alliance News) - Barclays PLC on Tuesday reported its net loss widened in 2015, and said it will sell down the 62.3% stake held in its African business, slash annual dividends by more than half, and enlarge the size of its non-core unit, as new Chief Executive Officer Jes Staley looks to accelerate the group's restructuring and strengthen its financial position.
Staley said the bank intends to sell down the stake in Johannesburg-listed Barclays Africa Group Ltd over the next two to three years, with the aim of deconsolidating the business from the group's accounts. The African business is a "high quality" franchise, Staley told reporters. He said that holding a majority stake has become less attractive due to the international reach of regulatory capital requirements, both in the UK and further afield, while the economic slowdown in South Africa and the depreciation of the rand have hit returns.
That move is one of several measures designed to simplify the group, Barclays said, confirming plans to prepare for ring-fencing regulations in the UK. Staley said the group will be founded upon two sibling entities, capable of achieving solid investment-grade credit ratings: Barclays UK, the ring-fenced bank, will house retail operations in the country, while the Corporate & International division will host the investment bank.
Further restructuring will see the transfer of GBP8.0 billion of assets to the group's non-core division, bringing the total to GBP55.0 billion. The amount of risk-weighted assets in the non-core division has more than halved from GBP110 billion in 2013, and the bank still expects to shrink it to GBP20.0 billion by the end of 2017. The newly added assets include unwanted investment banking assets, its wealth business in Asia, and businesses in Egypt and Zimbabwe not owned by Barclays Africa Group. Barclays expects the restructuring of the non-core division to cost GBP400.0 million in 2016.
The lender said it will pay a dividend of 6.5 pence per share for 2015, but the payment will be cut to 3.0p in both 2016 and 2017, which together with the sell-down of the African operations should help to boost its common equity tier one ratio - a measure of financial strength - by at at one percentage point. The group's CET1 ratio improved to 11.4% from 10.3% over the course of 2015. In future, dividend payments will be made semi-annually rather than on a quarterly basis.
Barclays said its net loss widened to GBP394.0 million in 2015, from GBP174.0 million the prior year, as litigation and conduct costs swelled to GBP4.39 billion from GBP2.81 billion, driven by higher provisions for UK customer redress and further charges for ongoing investigations and litigation including foreign exchange.
Pretax profit, adjusted to exclude most of those litigation and conduct charges, fell to GBP5.40 billion from GBP5.50 billion, coming short of company-compiled analyst consensus of GBP5.77 billion.
The drop in adjusted pretax profit came as losses widened in Barclays' non-core division. Adjusted pretax profit from the investment bank rose by 17% to GBP1.61 billion, with the increase being second to only the Barclaycard credit cards business's 22% rise to GBP1.63 billion.
However, Finance Director Tushar Morzaria said the group does not expect the investment bank's performance in the first quarter of 2016 to be as strong as the corresponding three months the prior year, citing volatility in financial markets since the turn of the year.
The group's personal and corporate banking arm grew adjusted pretax profit by about 5.0% to GBP3.04 billion. Meanwhile, the Africa banking operations produced a 1% drop in adjusted pretax profit to GBP979.0 million.
Nevertheless, Africa banking's return on average equity - a measure of profitability - was 8.7% in 2015, down from 9.3% the prior year. The investment bank generated the lowest such return of the group's four divisions, even as the division's return improved to 5.6% from 2.7%. Barclaycard's return grew to 17.7% from 16.0%, while the personal and corporate banking arm's return improved to 12.1% from 11.9%.
The group's annual report contained details of further legal, competition and regulatory matters, including "potentially fraudulent activity" by customers of Barclays Africa Group's Absa Bank Ltd subsidiary. The activity concerns the use of "import advance payments to effect foreign exchange transfers from South Africa to beneficiary accounts located in Asia, UK, Europe and the US".
"As a result, the group is conducting a review of relevant activity, processes, systems and controls. The group is keeping relevant agencies and regulators informed as to the ongoing status of this matter," Barclays said.
Meanwhile, the Portuguese Competition Authority is investigating whether competition law was infringed by the exchange of information about retail credit products among 15 banks, including Barclays, in the country. Like HSBC Holdings PLC, Barclays confirmed it is cooperating with US authorities over its hiring practices in Asia.
Shares in Barclays were down 11% at 153.40p midday Tuesday.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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