Barclays PLC (LON:BARC) shares took a tumble today despite the bank posting a better-than-expected first quarter profit with investors unsettled by worries about the future of the man engineering the growth.
The FTSE 100-listed lender reported a pre-tax profit of £1.68bn in the three months to 31 March, compared to £793mln in the year-ago period and analysts’ expectations of £1.47bn, driven by growth in the core businesses and narrowed losses in the non-core business.
Total income rose to £5.8bn from £5.0bn, broadly in line with market forecasts, as a 12% increase in income in core businesses, particularly the international arm, offset a 69% drop in the non-core units.
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Group return on tangible equity (RoTE) fell to 1.8% from 3.8%, reflecting an £884mln impairment charge related to the writedown of its holding in the Barclays Africa division.
“On Africa, we await approval for the separation arrangements already agreed with local management, following which we will be able to make further progress towards regulatory deconsolidation.,” said chief executive Jes Staley.
On track to close non-core businesses in two months
Barclays said it remains on track to close down its non-core businesses by 30 June and risk weighted assets had fallen by a further £5bn to £27bn.
In its core UK business, the net interest margin improved 7 basis points to 3.69% with net interest income increasing 1% to £1.51mln.
The group’s capital edged up slightly, with the common tier equity 1 ratio rising to 12.5% from 12.4% in December, thanks to a drop in risk weighted assets.
Jes Staley faces shareholder opposition over whistleblower probe
But the results come in the wake of news that a corporate governance firm has advised the bank’s shareholders against backing Staley for re-election to the board at the next shareholder meeting on 10 May.
Institutional Shareholder Services said investors should abstain from the vote since the chief executive was under investigation by UK regulators for trying to unmask a whistleblower who raised concerns about the conduct of an employee at the bank.
The news came as another blow as Barclays continues to tackle legal issues including legal proceedings brought against it by the US Department of Justice over mis-sold mortgage bonds.
In its first quarter results the company said "certain legal proceedings and investigations relating to legacy issues remain outstanding".
Among the legal proceedings, Barclays said the UK Serious Fraud Office has stated that it intends to make a decision shortly in respect to its 2008 emergency fundraising from Qatar.
Barclays has already paid a £50mln fine in 2013 for failing to disclose £322mln of fees for so-called “advisory services” it paid to the Qatari investors who invested in the bank.
“This decision could impact on the timing and/or outcome of other actions related to these capital raisings,” said Barclays finance director, Tushar Morzaria.
Barclays shares top FTSE 100 fallers list
Worries over Staley’s future helped unsettle Barclays shares in early trading, according to some traders, with the stock still topping the FTSE 100 fallers list in afternoon trading, down 4.7%, or 10.45p at 213.50p.
In a note to clients reiterating a ‘hold’ rating on the stock, Shore Capital analyst, Gary Greenwood, said: “While we are encouraged by the progress that is being made in narrowing the gap between group and core returns, there is not enough upside to justify a more positive stance at this juncture.”
He added: “Barclays shares currently offer 7% upside to our fair value estimate of 240p, which we expect to leave broadly unchanged.”
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