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 and weaker-than-expected returns at its investment bank.
The lender, which is entering the final two months of a restructuring program, said it was making good progress ditching unwanted businesses. But shares in the bank fell 4% in morning trading as investors questioned whether the refashioned franchise would be capable of generating strong profits.
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Under Chief Executive Jes Staley, Barclays embarked on a program to double down on its investment bank and refocus on the U.K. and U.S.
The bank said its investment banking income rose 7% in the quarter compared with a year earlier, helped by an increase in debt trading. But analysts said that jump missed expectations and fell short of some U.S. competitors' performances. "We would have liked to have done better," said Mr. Staley.
Total revenue rose 16% to GBP5.8 billion ($7.5 billion), bolstered by strong growth at its cards business. Profit before tax more than doubled to GBP1.68 billion.
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.
Several hurdles still remain. Barclays must still extricate its African business from its accounts. It has signed a separation agreement, which must now be approved by South African regulators. The bank on Friday took an GBP884 million impairment on the unit's value, reflecting the cost of splitting it out and a fall in its share price as the South African economy stuttered.
Net profit at Barclays was GBP190 million, compared with GBP433 million a year earlier. Meanwhile, bad loans ticked up nearly 20%, driven mainly by its U.S. credit-card unit.
The news of rising impairments and the charge in Africa led some analysts to question 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.
Adding to the uncertainty, earlier this month Barclays said 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. Mr. Staley said he hadn't tendered his resignation over the matter and that the board "unanimously supported me continuing as CEO of the bank."
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 investigated 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. Serious Fraud Office to make a decision soon on whether to charge the bank.
Write to Max Colchester at firstname.lastname@example.org
(END) Dow Jones Newswires
April 28, 2017 04:36 ET (08:36 GMT)