Barclays Net Profit Tumbles on Africa Write-Down -- Update

By Max Colchester Features Dow Jones Newswires

Barclays PLC said its net profit fell by more than half in the first quarter of the year, as the British bank's bottom line was stung by the cost of shedding its African business.

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Barclays said Friday that revenue rose 16% to GBP5.8 billion ($7.5 billion) compared with the same period a year earlier, bolstered by strong growth at it cards business. Net profit was GBP190 million, compared with GBP433 million a year earlier, as it took an GBP884 million impairment against the value of its African business.

The bank said its investment-banking income rose 7% in the quarter, helped by an increase in debt trading. Profit before tax more than doubled to GBP1.68 billion, boosted by a fall in the value of the pound against the dollar. However, bad loans ticked up nearly 20%, driven mainly by its U.S. credit-card unit.

Under Chief Executive Jes Staley's watch, the bank has looked to reinvigorate its investment-banking unit, while shedding a host of businesses around the globe. Mr. Staley said the bank was on track to close its "noncore" unit, which houses Barclays's unwanted assets, by the end of June.

"We are now just two months away from completing the restructuring of Barclays," Mr. Staley said in a statement.

Several hurdles still remain. Barclays must still deconsolidate its African business from its accounts. It has signed a separation agreement with its African business, which must now be approved by South African regulators. The write-down reflected the cost of splitting the unit out and a fall in its share price as the South African economy stuttered.

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The rising impairments and the cost of separating the African business had some analysts questioning whether Barclays will need to tap shareholders for equity. "U.K. macro and South African politics will dictate whether [Barclays] escapes another capital raise," said Chirantan Barua, an analyst at Bernstein Research.

A series of litigation issues are also hanging over the bank. Barclays is being sued by the U.S. Justice Department for its alleged role in the sales of toxic mortgage-backed securities. It is also being probed by U.S. and U.K. authorities over how it wooed Middle Eastern investors to pump cash into the bank at the height of the financial crisis. On Friday, Barclays said it expected the U.K.'s Serious Fraud Office to make a decision soon on whether to charge the bank.

Adding to the uncertainty, earlier this month Barclays disclosed that U.K. regulators were probing Mr. Staley over his efforts to unmask a whistleblower who complained about a hire the bank made. Mr. Staley apologized to the bank's board. On Thursday, a prominent proxy adviser recommended that shareholders abstain from voting for his re-election.

Write to Max Colchester at max.colchester@wsj.com

(END) Dow Jones Newswires

April 28, 2017 03:18 ET (07:18 GMT)