Brexit: Barclays profits slip as bank sets aside £150m to deal with fallout from EU departure

UK bank preparing of economic slowdown and rising unemployment

Barclays has set aside £150m to prepare for Brexit-related disruption, following similar announcements from HSBC and Royal Bank of Scotland in recent days.

The British bank said the provision was to deal with a predicted slowdown in economic growth to 0.3 per cent and a spike in unemployment ot 5.7 per cent. The scenario is the better of two possible Brexit outcomes the Bank has planned for.

Stripping out legal costs and conduct charges, Barclays' profit before tax for 2018 rose 20 per cent to £5.7bn.

However, reported profits annual profits edged 1 per cent lower to £3.5bn due to conduct and legal charges. Shares rose 4 per cent on Thursday morning.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said Brexit “casts a shadow” over valuations of all banks at present.

“Indeed Brexit uncertainty has prompted Barclays to put aside £150m 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.”

HSBC said this week that economic uncertainty in the UK had meant more of its loans had gone bad in 2018 than expected.

“The longer we have the uncertainty the worse it's going to be for the customers,” chief executive John Flint said on Tuesday.

“Customers are absolutely postponing investment decisions… and that's been the part of this slowdown that we have seen in the UK.”

RBS also warned on Friday that Brexit risks lowering demand for loans while increasing the number of defaults. The majority taxpayer-owned lender has set aside £100m to prepare for disruption as the UK leaves the EU.

Barclays’s reported profits were reduced by £2.2bn of legal and conduct costs, including a £1.4bn settlement with US authorities over its sale of mortgage-backed securities in the lead-up to the financial crisis and £400m for payment protection insurance (PPI) mis-selling.

Jes Staley, chief executive of Barclays, said: “2018 represented a very significant period for Barclays.

“In the course of the year, having resolved major legacy issues and reduced the drag from low returning businesses, we started to see the earnings potential of the bank, as the strategy we have implemented began to deliver.”

Mr Staley was paid £3.4m for 2018 down from £3.9m in 2017 after £500,000 of previous bonuses was clawed back because of his attempts to uncover a whistleblower.

Six Barclays employees took home more than £6m last year and 430 earned over £1m.

Asia-focused bank Standard Chartered announced on Thursday that it has put by $900m (£688m) for fines relating to investigations in the UK and the US stretching back more than a decade.

The provision includes a fresh £102.2bn penalty from the UK’s Financial Conduct Authority, while also covering “historical violations of US sanctions laws”. Standard Chartered is in ongoing talks with US authorities over alleged sanctions breaches.