Barclays Follows Other Banks In Provisioning For Brexit Uncertainties

Keeping the eventuality of a no deal Brexit, Barclays announced a provision of £150 million. The company said that the amount had been apportioned for “anticipated economic uncertainty” related to Brexit.

This was stated by the bank as it announced a profit of £3.5 billion for 2018 which was virtually the same as the previous year.

The provision for Brexit that Barclay’s has set aside has been done to help it to cover costs such as rising bad debts in case there is a negative impact on the British economy after the exit of the United Kingdom from the European Union.

2018 was described as a “very significant” year for the bank by its chief executive, Jes Staley, who added that it had been able to resolve a number of important issues.

In 2017, Barclay’s had to take a hit of £2.2 billion as it shelled out fines and penalties which includes very large settlement with the regulators in the US as well as in the UK and for compensation for PPI.

It will pay a dividend of 6.5p this for the current year, said Barclay’s.

US-based financier Edward Bramson has been constantly pressurizing the management of the bank to enhance its performance. With a 5.5 per cent stake in the bank, Bramson has also been demanding that he be given a seat on the board of the bank. One of his major demands is for Barclay’s to reduce the functioning of its investment bank. A 15 per cent increase in profits was reported last year by the investment bank at £2.6 billion.

his plans would be good for shareholders, said Staley in a statement accompanying the latest results.

A larger portion of the earnings is being planned by the bank to be returned back to its shareholders, he said which would include implementing a share buyback program which is a management tool that conventionally lends support to the share price of a listed company.

Warnings about the possible negative impacts of Brexit on the British economy have been issued by a number of banks including Barclays. The UK economy faced “a heightened level of uncertainty related to ongoing Brexit negotiations”, said RBS chief Ross McEwan last week.

“Larger corporations are pausing on their investments. And this cannot be good for the economy long-term, because those large corporations then employ smaller businesses and individuals,” he said in a television interview to the BBC.

The provisions for Brexit related economic uncertainty in the British economy was increased by £165 million to £410 million by HSBC at the end of last year.

“As with all the UK banks, Brexit casts a shadow over valuations, despite improving fundamentals. Indeed Brexit uncertainty has prompted Barclays to put aside £150 million in case of deteriorating economic conditions in the UK. That could prove to be insufficient or over-cautious, depending on proceedings in Westminster and Brussels. Therein lies the puzzle of the UK banking sector which explains lowly share prices; like Schrödinger’s cat, no-one’s quite sure what state it’s in,” said Laith Khalaf, from stockbrokers Hargreaves Lansdown while referring to the  Brexit provisions made by Barclays.

(Adapted from BBC.com)

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