British banking giant Barclays says it garnered before-tax profit of £3.1bn (2019: £4.4bn) in 2020, even after setting aside an astonishing £4.8bn (2019: £1.9bn) for potential loan losses “due to the deterioration in economic outlook driven by the Covid-19 pandemic”.
“The expected credit loss (ECL) provision remains highly uncertain as the economic impact of the global pandemic continues to evolve,” the bank warns.
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However, the company remained profitable in every quarter, including generating profit before tax of £646m in the fourth quarter.
Total income increased to £21.8bn (2019: £21.6bn). Within Barclays International, CIB income was up 22%, while CC&P income was down 22%.
In Barclays UK, income was down 14%. Thanks to buoyant securities trading, however, the bank’s trading arm made up for the lacklustre performance in the UK.
Operating expenses increased 1% to £1.,7bn, including structural cost actions and additional Covid-19 related costs.
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By GlobalDataStrong enough to pay dividends, bonuses
In spite of the profits hit, the London-based bank deems its business healthy enough to resume capital distributions.
“We have today announced a total payout equivalent to 5p per share, comprising a 1p 2020 full year dividend and the intention to initiate a share buyback of up to £700m. We expect to comment further on capital distributions when appropriate,” said chief executive James E Staley.
The company’s largesse also includes a £1.6bn bonus pool for staff and £1.4m in annual bonuses and incentive shares for the CEO.
Mr Staley’s annual bonus awards took his total pay to £4.01m for 2020, though this was down on the £5.9m paid out in 2019.
Barclays remains well capitalised, well provisioned for impairments, highly liquid, with a strong balance sheet, and competitive market positions across the Group.
Staley is accordingly optimistic about the year ahead: “We expect that our resilient and diversified business model will deliver a meaningful improvement in returns in 2021.”
Economic uncertainty adjustments
Macroeconomic forecasts indicate that longer-term impacts of the pandemic will result in higher unemployment levels and customer and client stress.
However, due to government and bank support measures, significant credit deterioration has not yet occurred. “This delay increases uncertainty on the timing of the stress and the realisation of defaults,” Barclays says.
What will happen, going forward, will depend largely on the longevity of the Covid-19 pandemic and related containment measures, as well as the longer-term effectiveness of central bank, government, and other support measures.
