A pedestrian passes a Barclays bank branch in Chelmsford, the UK, February 11 2021. Picture: CHRIS RATCLIFFE/BLOOMBERG
A pedestrian passes a Barclays bank branch in Chelmsford, the UK, February 11 2021. Picture: CHRIS RATCLIFFE/BLOOMBERG

London — A strong end to the year for Barclays  traders helped the British lender deliver a share buyback and a return to dividends even as the bank said the outlook for 2021 remained uncertain.

The London-based firm’s securities division reported a better-than-expected 45% rise in markets revenue for the year, the biggest trading jump among major global investment banks. But the pandemic continued to slam the bank’s lending businesses, an impact Barclays said was likely to endure in 2021.

“We’ve been very, very persistent in our strategy,” said CEO Jes Staley, who has championed the corporate and investment bank as a counterweight for tough times for retail banking. “2020 demonstrated the value of our diversified banking model.”

London-listed shares in the firm fell 3% making it the second-worst performer on the FTSE 100 index, as analysts highlighted the lack of clarity on the coming year.

Barclays, the first of the major British banks to report earnings, signalled that Covid-19 restrictions on socialising continued to pummel the wider economy. Profit before tax at its domestic business fell more than half to £282m in the final three months of the year, while its US credit card business saw pretax profit decline by about three quarters.

“The underlying emotion coming out of the pandemic was fear. Consumers have massively pulled back and focused on the strength of their personal balance sheets,” Staley said during a call with reporters.

UK debit and credit card spending was down 16.3% in January compared to 2020, though Staley predicted that “strong economic recovery” should happen “sometime in the second half of this year”, with Britons splurging once lockdowns end.

The bank said overall headwinds in the UK business were expected to persist in the medium term and that its groupwide return on tangible equity was set to “meaningfully improve”, but did not give a target.

The outlook was “very light on detail”, according to analysts at Citigroup. “The lack of context is unhelpful,” the analysts wrote in a note. “Comments on the outlook are unexciting,” said Edward Firth, an analyst at Keefe, Bruyette & Woods.

Staley said the bank was “prudent” in its preparations for defaults as governments start to wind down pandemic support measures, taking a £492m  charge for loan losses in the quarter, which was less than expected, to bring the total for the year to £4.8bn.

It also booked about £370m for changes including “real estate rationalisation, branch optimisation and the discontinued use of certain software assets”. Staley said on Bloomberg TV that while the lender was rapidly moving towards more digital services, “you’re not going to see a major restructuring from the bank in terms of cutting costs”.

The bank is unlikely to make a decision on real estate soon, said Staley. “Right now, there’s no plan on our part to make a major real estate move because I just don’t think we really know what’s going to happen by the end of the year,” he said.

Limited dividends

Barclays will pay investors 5p per share through a 1p dividend along with a buyback of as much as £700mthat will begin within weeks.

The Bank of England set strict limits on dividends or buybacks after relaxing a ban intended to preserve capital during the pandemic. Payouts cannot exceed 25% of a lender’s profit over the past two years, after deducting previously paid dividends, or 0.2% of risk-weighted assets. Staley said at last year’s earnings that the bank was looking at the possibility of buybacks.

Bloomberg

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