Barclays (LON:BARC) is scheduled to update investors on its first-quarter performance on April 26 and investors are bracing for a hit from the lender’s recently unveiled settlement with the US over mis-sold residential mortgage-backed securities in the run-up to the financial crisis.
First-quarter results to reveal hit
Barclays recently disclosed that it had reached a settlement with the United States Department of Justice over residential mortgage-backed securities sold by the group between 2005 and 2007. Under the terms of the settlement, the lender has agreed to pay a civil monetary penalty of $2 billion (£1.42 billion), which will be recognised in the first quarter of the current year.
Despite the hit to the lender’s results, the fine was below City estimates, raising hopes for dividend hikes or share buybacks.
Earlier this year, Barclays posted a £1.9-billion loss for last year, while cheering investors with news that it was restoring its dividend and pledged to return more cash to investors.
Ring-fencing and investor activism
The lender’s first-quarter update will also come after Barclays recently moved to ring-fence its UK retail arm to comply with regulations coming into force next year. The move, however, prompted Moody’s to trim the group’s credit rating has been downgraded to one level above junk.
Barclays is further being targeted by activist investor Edward Bramson, who has built up a five-percent stake in the bank. The Telegraph, however, reports that the FTSE 100 group has drawn up battle plans to fend off any attacks.
Jefferies hiked its stance on the group to ‘buy’ in the run-up to the results. The Financial Times quoted the analysts as commenting last week that investors would be “increasingly willing to look at 2020 earnings, where we see 27p of earnings per share, 9.4p of dividend per share and £4.4bn of prospective excess capital”.