Barclays share price: Profit before tax drops to £793m

on Apr 27, 2016
Updated: Oct 21, 2019

Barclays (LON:BARC) has posted its first-quarter results this morning, reporting a fall in profits, as well as a drop in its common equity tier 1 ratio.

**Highlights from Barclays’ statement:**
Profit before tax decreased 25% to £793m, including an own credit loss of £109m (Q115: gain of £128m)
Total income net of insurance claims decreased 11% to £5,041m as Non-Core income reduced £464m to a net expense of £242m. Core income, including an own credit loss of £109m (Q115: gain of £128m), decreased 3% to £5,283m despite the appreciation of average USD against GBP

Credit impairment charges increased 15% to £443m primarily driven by the impairment of a number of single name exposures, largely in respect of clients in the oil and gas sector. Exposures to the sector remain well managed and the increase in impairment is in line with expectations. The loan loss rate increased 8bps to 40bps
Total operating expenses reduced 7% to £3,825m following the non-recurrence of a number of notable items in Q115, partially offset by increased restructuring charges relating to strategic initiatives, increased implementation costs associated with the structural reform programme, continued investment in the Consumer, Cards and Payments business and the appreciation of average USD against GBP
The effective tax rate on profit before tax decreased to 31.3% (Q115: 50.0%) reflecting the non-recurrence of non-deductible litigation and conduct charges in Q115
Profit after tax in respect of continuing operations increased 3% to £545m
Underlying profit before tax, which excludes the impact of notable items, decreased 44% to £902m primarily driven by the underlying loss before tax in Non-Core of £815m (Q115: £274m). Total Group underlying income decreased 7% to £5,150m and total operating expenses increased 8% to £3,825m
Underlying return on average tangible shareholders’ equity was 4.5% (Q115: 9.0%) and basic earnings per share was 3.2p (Q115: 6.6p)
Chief Executive’s statement
“This quarter we have made good early progress against the strategy update we announced on the 1st of March. It is the first set of results as a transatlantic consumer, corporate and investment bank operating under our new configuration of Barclays UK and Barclays Corporate & International, and they show a Core business performing well in a challenging environment.
Core RoTE is 9.9%, within which Barclays UK posted an impressive 20.5% return on tangible equity. We can see clear growth opportunities, such as in our Consumer, Cards and Payments business, in which we want to continue to invest. The performance of our Corporate and Investment Bank was relatively resilient in a tough quarter, but there is more we must do to improve returns, and we are focused on management actions to do so.
We continue to target cost reductions in the Group and we are on track to meet our 2016 guidance for the Core business of £12.8 billion, and our longer-term target of a Group cost to income ratio under 60%.
Our CET1 ratio finished the quarter at 11.3%, with a clear path to reaching our end state target, and I expect the capital ratio to increase through the course of the rest of 2016.
On Africa, we continue to explore opportunities to reduce our shareholding to a level that achieves regulatory deconsolidation, including capital market and strategic options, and we are pleased with the level of indicative interest in what is a high quality business. Barclays Africa is an important partner, and we are working closely with local management, including on the planning for the operational separation of the two businesses, in a way that will preserve value for shareholders in both Groups.
The performance of the Core today shows the potential power of the Group once it is freed from the drag of Non-Core.
We promised to accelerate the pace of progress in reducing Non-Core so that our Group performance converges with our Core performance within a reasonable timeframe. Since the 1st of January, we have made progress in exiting from Investment Banking in nine countries, completed the sale of our Portuguese retail, wealth and SME banking businesses, and are progressing other announced sales, including the Italian branch network, the Index business and our Asian wealth business, towards completion in 2016.
As these deals complete we are reducing RWAs and, crucially, eliminating costs which have a direct impact on our profitability today and mask the true performance of our strong Core business. This is the work we need to complete.”
James E Staley, Group Chief Executive Officer
**More to follow…**
As of 07:05 BST, Wednesday, 27 April, Barclays share price is 173.95p.