Barclays Q1 Net Profit Erodes By 42%, Bank To Take Up $2.6B Credit Impairment Charge

Barclays PLC BCS has seen a sharp decline in its first-quarter net profit while having to take a credit impairment charge of $2.62 billion reflecting the bank’s initial estimate regarding the impact of COVID-19.

What Happened

The London-headquartered bank’s net profit stands at $753 million for the initial three months of the year, a decline from $1.3 billion in the same period last year.

The group’s pre-tax profit stood at $1.14 billion in Q1 2020, a fall of 38% from $1.84 billion in the same period last year. On Wednesday, the British bank reported a 42% decline in Q1 net profit on a year-on-year basis. 

Meanwhile, group income increased by 20% year-on-year to $7.84 billion on the back of strong performance in Barclays Corporate and Investment Bank due to higher trading volumes.

Barclay’s CEO, James Staley, said in the results statement, “We have taken a £2.1bn credit impairment charge which reflects our initial estimates of the impact of the COVID-19 pandemic.”

He disclosed, “Barclays UK, and Consumer, Cards and Payments (CC&P) showed a resilient income performance in Q1 despite challenges that are expected to remain for the rest of the year.”

Operating expenses at Barclays stayed roughly the same as Q1 2019 at $4.10 billion. 

Why It Matters

The bank’s common equity tier one (CET1) capital ratio grew marginally to 13.1% from 13% in Q1 2019, which, according to the bank, means they are “well capitalised.” CEO Staley added, “We believe that a RoTE [return on tangible equity] of greater than 10% remains the right target for the bank over time.”

Barclays has been subject to an extended period of macroeconomic uncertainty due to Brexit and the broader global trade environment.

The bank will scrap its dividend, and suspend share buybacks under pressure from the Bank of England, according to CNBC.

Price Action

Barclays shares traded 4.72% higher at $5.10 in the pre-market session on Wednesday. The shares had closed the regular session 7.27% higher at $4.87.

Photo Credit: Bajajvikram via Wikimedia.