Barclays reported on Thursday an annual profit of £ 1.53 billion ($ 2.11 billion) for 2020, down 38% from 2019, but exceeding analysts’ expectations.
The British creditor posted a fourth-quarter net profit attributable to shareholders of £ 220 million, despite the United Kingdom being navigating new blocking measures across the country amid the resurgence of Covid-19.
The strong performance in the corporate and investment bank, which saw full year earnings rise 22% to £ 12.5 billion, offset a strong slope in impairment expenses as a result of the deteriorating economic outlook caused by the pandemic.
Analysts polled by Refinitiv had expected a net loss of £ 44.88 million in the fourth quarter to generate a net profit of £ 1.22 billion for the entire year.
Barclays CEO Jes Staley told CNBC’s “Squawk Box Europe” on Thursday that there would be pent-up demand in the UK economy to unlock by the end of the year.
“The UK consumer in the face of the pandemic has clearly cut spending significantly, but has likewise invested in strengthening individuals’ balance sheets, particularly by increasing their deposits, and we feel that in our balance sheet,” said Staley.
“You have to believe that, once the pandemic has passed, these deposits represent pent-up spending, and we will see that in economic activity, hopefully, in the second half of this year.”
The final earnings report for 2020 followed a surprisingly strong third quarter, in which the bank posted a net profit of £ 611 million.
The previous year’s profit in the previous year was £ 2.46 billion, with a fourth quarter 2019 profit of £ 681 million.
Other highlights:
- The Common Equity Tier One Capital (CET1) ratio reached an all-time high of 15.1%, above 14.6% at the end of the third quarter.
- The return on tangible equity (RoTE) was 3.2%, compared to 5.1% in the previous quarter.
- The net interest margin (NIM) was 2.61%, compared to 3.09% at the end of 2019.
- Credit impairment charges for the entire year amounted to £ 4.8 billion, against £ 1.9 billion in 2019.
- The full year’s profit before tax was £ 3.1 billion, down from £ 4.4 billion in 2019.
Dividend payments
Barclays also announced that it would resume dividend payments to shareholders of one pence per share and embark on a £ 700 million share buyback. The Bank of England last year asked British creditors to suspend payments to shareholders.
Addressing the drop in RoTE, Staley said the bank managed to remain profitable in each quarter of 2020 due to the diversified business model implemented five years ago, with the investment bank reacting differently to the consumer bank division.
“Although our consumer bank struggled to reduce profitability, largely because we assumed significant impairment charges to form a reserve, the investment bank actually had a year-over-year return on capital of more than 13%, way that kept the bank profitable each quarter, “he said.