Barclays reported a pre-tax profit of £3.7 billion in the first six months of 2022, down from £4.9 billion a year ago. Analysts had predicted the bank to report a Q2 pre-tax profit of £3.9 billion.
Barclays’ most recent results were tainted by a £1.3 billion charge in the half to meet the costs of buying back the $17.6 billion worth of securities that it sold in breach of US regulations.
The bank previously admitted to selling more products to US investors than it was permitted to, which triggered an approximate loss of £450 million.
Since Russia’s invasion of Ukraine, some of the structured goods have increased in popularity, attracting further regulatory scrutiny for Barclays over the error.
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Over the past few months, house prices in the UK have continued to soar, with the average price hitting £281,000 in April 2022. This figure is £31,000 higher than the same month a year before.
On Friday, Barclays said the final price would depend on the size of Kensington's mortgage portfolio when the deal completes. Barclays estimates this sum will comprise around £2 billion worth of home loans.
The deal is expected to be completed later this year or early next year.
"The transaction reinforces our commitment to the UK residential mortgage market and presents an exciting opportunity to broaden our product range and capabilities," commented Matt Hammerstein, CEO of Barclays Bank UK.
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On March 28, the bank disclosed that it had exceeded a US limit on sales of structured products. This triggered a loss and a potential restatement of Barclays’ 2021 accounts.
Barclays’ new CEO, C.S. Venkatakrishnan, has reportedly said that the bank found no evidence to date of deliberate misconduct relating to the blunder and that Barclays was cooperating with all relevant regulators.
On Thursday, the bank said it planned to begin the $1.25 billion buyback “as soon as practicable” after resolving the situation with the US authorities.
“Barclays believes that it is prudent to delay the commencement of the buyback programme until those discussions [with the SEC] have been concluded,” Barclays said.
“Barclays remains committed to the share buyback programme and the intention would be to launch it as soon as practicable following resolution of filing requirements being reached with the SEC and the appropriate 20-F filings having been made.”
Facilitated by Goldman Sachs, the unnamed top investor sold 599 million shares on Monday evening, approximately equivalent to a 3.6% stake. This comes as a further knock to the British bank after it revealed a compliance error for overselling structured products in the US that led to a loss of around £450 million.
On Tuesday, Barclays shares were down at 3.3% after falling 4% on Monday.
According to Eikon data, Monday also saw Capital Group, one of the world’s largest investment firms, sell 399 million Barclays shares. However, there’s presently no proof to suggest the move by Capital Group was connected to the top investor’s $1.2 billion sale.
Other key Barclays shareholders include Qatar Investment Authority (QIA) and Blackrock. According to Eikon data, these each have an approximate 3% stake in the British bank.
An investigation into the nature of Staley’s relationship with Epstein, who died in prison, is still underway. Nonetheless, Staley is set to receive £2.4 million in pay, as well as a £120,000 pension allowance, for 2021.
In a statement, the bank said: "In line with its normal procedures, the committee exercised its discretion to suspend the vesting of all of Mr Staley's unvested awards, pending further developments in respect of the regulatory and legal proceedings related to the ongoing Financial Conduct Authority and Prudential Regulatory Authority investigation regarding Mr Staley."
According to the report, Staley was paid approximately £25 million in his near-7-years at Barclays. He holds 18 million shares in the bank, including £3.3 million worth granted by Barclays as an “unvested” award for 2021-2023.
Under Staley’s strategy for boosting the bank, Barclays profits rocketed to £8.4 billion.
“Barclays and Mr Jes Staley, Group Chief Executive, were made aware on Friday evening of the preliminary conclusions from the FCA and the PRA of their investigation into Mr Staley’s characterisation to Barclays of his relationship with the late Mr Jeffrey Epstein and the subsequent description of that relationship in Barclays’ response to the FCA,” the statement said.
“In view of those conclusions, and Mr Staley’s intention to contest them, the Board and Mr Staley have agreed that he will step down from his role as Group Chief Executive and as a director of Barclays.”
Barclays pointed out that the investigation had not found that its CEO “saw, or was aware of, any of Mr Epstein’s alleged crimes.” Jeffrey Epstein was arrested in July 2019 on child sex-trafficking charges but hung himself a month later in a Manhattan federal prison.
Subject to regulatory approval, C.S Venkatakrishnan is set to take on the role of Group Chief Executive in place of Staley with immediate effect. The bank has said it is confident that under Venkatakrishnan’s leadership, it will “continue its strategic direction and improve performance in line with the progress of recent years.”
Last week, Pod Point announced it is looking at a premium listing with a free float of 25% minimum. It is expected that the float will raise approximately £120 million, with the offer comprising the sale of new shares in addition to some by existing shareholders such as Legal and General Capital Investments. EDF, which owns a 78% stake in the company, will keep a holding of over 50% while Legal and General will maintain only a minority shareholding.
Barclays Bank and Bank of America will stand as joint global coordinators, and as joint bookrunners along with Numis Securities.
Pod Point, established in 2009, is currently the UK’s largest provider of home charging points for electric vehicles and the second largest of charging for workplaces. The company predicts that by 2040, 25 million electric vehicle charging stations will be needed across the country.
Exceeding analysts’ expectations, Barclays has posted a quarterly attributable profit of £2.1 billion, up from £90 million for the second quarter of 2020. According to Refinitiv data, analysts had predicted a net reported income of £1.7 billion for the three months up to the end of June. Investment banking fees were up 27%, whilst equities were up 38%.
The bank has also announced that it will be increasing capital distributions to shareholders. Shareholders will receive a half-year dividend of 2 pence per share and an additional buyback of up to £500 million. Barclays shares are up by approximately 15% year-to-date. However, they were as much as 31% higher at the end of April 2021.
As detailed in its first-quarter earnings report, Barclays has also seen a substantial reduction in credit loss provisions and successfully released almost £800 million from its credit impairment provisions instead of the £1.6 billion charge incurred for the same period of 2020.
The move comes as part of a larger wave of opposition to the trading platform, as peers Santander and Barclays also block payments to Binance. Back in June, the Financial Conduct Authority (FCA) issued a warning against Binance, banning the trading platform from conducting any regulated activity in the UK, and advising consumers to be wary of advertisements that promised a high return on crypto assets investments. The FCA ordered Binance to remove all forms of advertising and promotions by 30 June.
NatWest has said it has seen high levels of cryptocurrency investment scams targeting customers across retail and business banking, a trend particularly prevalent across social media platforms. To protect its customers, the UK bank said that it was temporarily reducing the maximum daily amount that a customer can transfer to cryptocurrency exchanges. NatWest is also blocking payments to a number of cryptocurrency asset firms, where the bank notes some customers have already suffered fraud-related harm. However, despite the changes, NatWest has stated that customers will still be able to accept cryptocurrencies as a form of payment if they wish to do so.
On Monday, British bank Barclays said it is blocking its customers from using their debit and credit cards to make payments to crypto exchange Binance. The bank has been contacting customers who have used their cards on Binance in the past year and has advised them that they will be suspending payments until further notice.
The FCA, which is the UK’s highest financial auditing authority, issued a consumer warning on Saturday June 26, stating that Binance Markets Limited cannot undertake any regulated activity in the country.
Following the FCA’s warning over the safety and security of Binance, there has been increased scrutiny from customers, banks, and regulators alike. The move by Barclays is not an isolated decision but instead comes as part of a wave of international action from state authorities, who are becoming increasingly concerned by the rapid rise of crypto and its potential for increased money laundering and organised crime. On June 21, the Chinese Government announced it would be clamping down on cryptocurrency mining, an announcement that saw Ethereum and Dogecoin prices drop.
Here Andy Barratt, UK managing director at international cybersecurity specialist Coalfire, explores how the financial services sector can turn the tide on costly, high-profile cyber missteps.
It’s fair to say that the financial services sector has struggled to secure positive consumer sentiment for itself recently – particularly in relation to cybersecurity. At the end of October, the government’s Treasury Select Committee (TSC) went so far as to say that the number of IT failures at banks and other financial services firms has reached a level it deems “unacceptable”.
The criticism, which highlighted poor IT performance within financial firms and a lack of decisive action from their regulators, comes in the wake of a string of high-profile and costly cyber glitches in recent years. Most notable among those is TSB’s unsuccessful attempt to migrate its systems over to new parent company Banco Sabadell.
Customer details were left easily accessible and vulnerable to fraud attacks, as well as resulting in thousands being unable to access their accounts. But TSB are not the only culprits: Barclays, RBS and VISA are among a raft of other major financial service providers to have suffered serious technical glitches in the past few years.
Why then, with so much at stake, are financial firms lagging behind when it comes to their cyber strategy?
Complex legacy tech infrastructure
The first aspect that makes large firms so susceptible to attacks is that their IT systems are often complex and, significantly, outdated. Hackers can easily find weak spots in the system or, as in TSB’s case, vital information can slip through the cracks.
The first aspect that makes large firms so susceptible to attacks is that their IT systems are often complex and, significantly, outdated. Hackers can easily find weak spots in the system or, as in TSB’s case, vital information can slip through the cracks.
Our inaugural Penetration Risk Report, which took place around the time of TSB’s issues, found that the largest firms are less likely to be prepared to face up to cybercrime than their mid-sized equivalents – despite greater budgets and resources – due to their cumbersome and slow-moving infrastructure.
More recently, we’ve seen those larger businesses close the gap, mostly through the support of in-built cloud security services, but the risks still remain for many. In the financial services sector specifically, this year’s study indicated that the level of external threat has actually increased.
The rush to implement services under a new ‘Digital’ initiative sometimes comes at the cost of addressing the underlying legacy issues too. Whilst the big banks rush to keep up with the online-only challenger banks they re-allocate budget for the new apps and forget the underlying infrastructure they depend on.
‘Yes’ culture
One of the key risks boosting that threat is a habit within large corporate cultures for IT teams or risk managers consistently ‘downgrading’ risks due to lack of understanding or complacency when reporting to those further up the pecking order. This is dangerous and can lead senior figures to the conclusion that everything is ‘ok’ within their organisation when, in reality, an IT crisis is just around the corner. This is particularly true when organised crime groups are targeting financial services with highly sophisticated attacks that are often discounted by management with a throw away ‘nobody would do that’ comment.
Companies should attempt to foster a ‘safe’ environment where staff feel comfortable raising problems they encounter so that solutions can be found before disaster strikes. They should also to remain current with intelligence from their incident response and forensic partners who will see the sophisticated threats when they do cause a breach.
An enhanced understanding of the issues facing the business is less likely to leave senior spokespeople up a creek without a paddle when facing the media. No one would expect a CEO to know all the ins-and-outs of their IT infrastructure, but basic comprehension can go a long way. Knowledge is power.
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Weak links in the chain
Due to the nature of the industry and the services they provide, banks and large financial firms are required to interact with third parties on a massive scale. Unfortunately, this isn’t without its drawbacks.
Many third parties – and, by extension, their own supply chain – lack the sophistication and / or the wherewithal to deal with cyberattacks. As such, they are often the first port-of-call for a hacker looking to worm their way into a major system.
An example includes the British Airways data breach in the summer of 2018, when hackers were able to take information directly from the airline’s website thanks to access from a third party.
Often, being subject to this form of intrusion is pure bad luck rather than bad planning. However, large firms must ensure that they’re sufficiently protected and that access for third parties is limited. It’s a simple case of making sure that your back’s covered wherever possible.
Human error
Perhaps the most common error (and the most tangibly addressable) is the human risk inherent within any business. Naturally, the larger your workforce, the greater the risk you face, which is a major issue within the financial services sector.
Phishing, a scam that prompts staff to provide their username and password, is still one of the simplest but most successful ways potential attackers get their foot in the door.
The key to combatting the danger is providing constant training to employees so that they’re fully aware of the threat and the responsibility that they have towards protecting the business.
What’s more, the high-profile cases mentioned above are dangers in themselves: when the glitch or failure makes the news, a sign post is placed for hackers looking to break in. Each headline is an ‘x-marks-the-spot’ for a company’s weak spot, as well as their competitors’.
It’s a brutal world that financial services businesses face as technology advances but, with such large amounts of money at stake, they must be up to the challenge.
Barclays has announced that it has teamed up with the UK Government to provide £1bn of development finance to help build thousands of new homes across England to help increase the pace and volume of housing provision.
Loans ranging from £5 million to £100 million, which will be competitively priced, are available for developers and house builders who are able to demonstrate the necessary experience and track record to undertake and complete their proposed project. Funding is open to new clients as well as existing Barclays clients, and will put greater emphasis on diversifying the housing market, as at present, almost two-thirds of homes are built by just ten companies.
A key priority of The Housing Delivery Fund is to support small and medium sized businesses to develop homes for rent or sale including social housing, retirement living and the private rented sector, whilst also supporting innovation in the model of delivery such as brownfield land and urban regeneration projects.
Launching the fund, John McFarlane, Barclays’ Chairman, said: “There is a vital need to build more good quality homes across the country. This £1bn fund is about helping to do exactly that by showing firms in the business of house building that the right finance is available for projects that help meet this urgent need.
“We are very pleased to be working with government to get the country building more homes, more quickly.”
Housing Secretary Rt Hon James Brokenshire MP, said: “My priority as Housing Secretary is to get Britain building the homes our country needs. This new fund - partnering Homes England with Barclays - is a further important step by giving smaller builders access to the finance they need to get housing developments off the ground.
“This is a fantastic opportunity to not only get more homes built but also promote new and innovative approaches to construction and design that exist across the housing market.”
Chairman of Homes England, Sir Ed Lister, said: “Homes England has been established to play a more active role in the housing market and do things differently to increase the pace, scale and quality of delivering new homes.
“The Housing Delivery Fund demonstrates Barclays’ commitment to the residential sector and will provide a new funding stream for SME developers to help progress sites and deliver more affordable homes across England.”
Today’s agreement with Barclays forms part of the Government’s wider commitment to increase the pace of housing delivery in England. Ministers have been clear on their ambition to achieve 300,000 new homes a year by the mid-2020s, which follows 217,000 homes built last year, the biggest increase in housing supply in England for almost a decade.
(Source: Barclays)
