Barclays resumes dividend payouts as annual profit halves

Barclays resumes dividend payouts as annual profit halves

February 18, 2021

Barclays’ profits plunge 30% to £3.1bn for 2020 – after setting aside £4.8bn to cover ‘bad loans’ from the pandemic that bosses fear won’t be paid back – but investment arm sees best year since 2014 with 22% rise in revenue

  • Barclays boss Jes Staley said ‘the time is right to resume capital distributions’
  • Huge £4.8billion pot was set aside to cover ‘bad loans’ to struggling customers
  • Expert said ‘They’re not promising anything for 2021’ after heavy pandemic year

Banking giant Barclays’ annual profit in 2020 fell by a third after setting aside £4.8billion to cover bad loans after finding itself in the ‘eye of the pandemic’.

The group reported a 48% plunge in underlying pre-tax profits, excluding litigation and conduct charges, to £3.2 billion for 2020, while statutory profits fell 30% to £3.1 billion.

It was blamed on a huge £4.8billion pot it had set aside to cover ‘bad loans’ it fears it will never get back from struggling customers. 

But it did unveil a shareholder dividend payout despite the profits hit, as well as a £1.6 billion bonus pool for staff and £1.4 million in annual bonuses and incentive shares for boss Jes Staley.

That came after investment banking revenue rose 22 per cent, the best annual result for at least seven years.

And Barclays warned that while costs related to the pandemic will remain high throughout 2021, it expected loan loss charges to be ‘materially below’ last year’s £4.8 billion hit.

Barclays boss Jes Staley said ‘the time is right to resume capital distributions’ after results

It added that investment banking trading offset the impact on its retail arm, with its ‘best ever year’ for markets and banking income helping keep the group in profit every quarter.

Mr Staley said: ‘Given the strength of our business, we have decided the time is right to resume capital distributions.

‘We have today announced a total payout equivalent to 5p per share, comprising a 1p 2020 full year dividend and the intention to initiate a share buyback of up to £700 million.’

He added: ‘We expect that our resilient and diversified business model will deliver a meaningful improvement in returns in 2021.’

In its annual report published alongside the results, Barclays revealed the staff bonus pool was 6% higher than the £1.5 billion shared out in 2019.

It said this represented a ‘relatively modest increase across the investment banking businesses, reductions for all other businesses and appropriate recognition for the contributions of our more junior colleagues’.

Barclays’ annual profit in 2020 fell by a third after setting aside £4.8billion to cover bad loans

Barclays results decoded by expert 

Banking analyst Philip Augar

Banking analyst Philip Augar said of the results: ‘It’s clearly not great news, I suppose the consolation for the economy and for Barclays shareholders is it could have been worse.

‘The amount they’ve been setting, providing against bad loans has been getting less quarter by quarter and that be a sign we are past the worse.

‘But they’re pretty cautious in what they say, they’re not promising anything for 2021 – they want to see how it turns out pandemic-wise.

‘The bank’s financial position is pretty solid, shareholders have been through a tough time with Barclays over the last year or two so I think it’s right for them.

‘They are going to buy back shares which is some sign they feel finances are in the right place and that is good news for shareholders, effectively it sees an increase in shareholder returns.

‘CEO Jes Staley, he thinks that the investment bank is counter cyclical to what happens in the retail side. That strategy has paid off in the current year, investment banking – that’s trading and markets – is going really strongly. The consumer bank – that’s high street banks and credit cards – that’s absolutely in the eye of the pandemic storm and profits are down on there mainly because of the provisions.’ 

Source: Radio 4 

Mr Staley’s annual bonus awards took his total pay to £4.01 million for 2020, though this was down on the £5.9 million paid out in 2019. 

Banking analyst Philip Augar told Radio 4: ‘It’s clearly not great news, I suppose the consolation for the economy and for Barclays shareholders is it could have been worse.

‘The amount they’ve been setting, providing against bad loans has been getting less quarter by quarter and that be a sign we are past the worse.

‘But they’re pretty cautious in what they say, they’re not promising anything for 2021 – they want to see how it turns out pandemic-wise.

‘The bank’s financial position is pretty solid, shareholders have been through a tough time with Barclays over the last year or two so I think it’s right for them.

‘They are going to buy back shares which is some sign they feel finances are in the right place and that is good news for shareholders, effectively it sees an increase in shareholder returns.

‘CEO Jes Staley, he thinks that the investment bank is counter cyclical to what happens in the retail side. That strategy has paid off in the current year, investment banking – that’s trading and markets –  is going really strongly. The consumer bank – that’s high street banks and credit cards – that’s absolutely in the eye of the pandemic storm and profits are down on there mainly because of the provisions.’

It came as it was reported that nearly two million people have been unable to work for at least six months after losing their jobs in the pandemic or being placed on furlough, a think-tank report has said.

The Resolution Foundation puts the figure at 1.9million – compared to official statistics showing 1.2million.

It says one in five of these people fear they will remain jobless or their roles will vanish when the taxpayer-funded furlough scheme stops on April 30.

Meanwhile, in a further blow to the job market, a quarter of British businesses have today said they expect to fire staff if Chancellor Rishi Sunak does not extend a job furlough programme that is due to expire at the end of April.

The Resolution Foundation report suggests a ‘long Covid’ in the labour market will add to the after-effects of the pandemic, which are expected to include high debt levels and mental health problems. 

A graph showing the number of people in the UK either partially or fully furloughed since the pandemic began 

A graph showing how many people have had some experience of unemployment of furloughing over the past year

A graph showing the number of people in the UK who have been unemployed or furloughed for more than six months

Nye Cominetti, an economist at the think-tank, said: ‘While the UK’s economic prospects are finally looking up, job insecurity remains high, particularly among those who have spent long periods not working or who are currently furloughed. 

The Chancellor must use his Budget to set out his own roadmap for phasing out the furlough scheme gradually and in a way that acknowledges where the risks of rising unemployment are highest – in sectors like hospitality.

‘This would keep a lid on rising unemployment and encourage firms to bring back existing workers while tax breaks on hiring could help more people to move jobs too.’ 

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