Barclays sees profits slump 30% as pandemic bad loan provision hits £4.8bn

Feb 18, 2021

Barclays has reported a 30% drop in pre-tax profits as its provision for bad loans due to the pandemic hit £4.8bn.

However, the drop to £3.1bn in 2020 was much less than forecast as a strong performance by its investment bank offset cash set aside to cope with losses caused by the economic fallout of COVID-19.

Despite the profits hit, the banking giant said it would resume paying dividends after lenders halted payouts last year at the request of the Bank of England.

Barclays also unveiled a £1.6bn bonus pool for staff and £1.4m in annual bonuses and incentive shares for boss Jes Staley.

The posted profit was well above the average estimate of £1.96bn from analysts’ forecasts compiled by the bank.

The bank’s results revealed another £492m had been earmarked to cover expected borrower defaults due to the coronavirus crisis in the final three months of the year, although this was down nearly a fifth on the previous quarter.

Barclays warned costs related to the pandemic will remain high throughout 2021, but that it expects loan loss charges to be “materially below” the £4.8bn hit.

It said investment banking trading offset the impact on its retail arm, with its “best ever year” for markets and banking income helping keep the group in profit every quarter.

Mr Staley said: “Given the strength of our business, we have decided the time is right 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.”

He added: “We expect that our resilient and diversified business model will deliver a meaningful improvement in returns in 2021.”

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