Barclays today announced a 35 per cent profit increase spurred by Brexit. Revenues at the bank’s bond trading division, which buys and sells debt, rocketed 40 per cent in the months after the shock vote, Barclays said.
Brexit has sparked a flurry of activity because no one has known which way markets or interest rates will turn next. Extreme volatility benefits the bond and currency trading divisions at big banks, which take a fee for each transaction, reports The Independent.
Barclays’ investment banking division also benefited from the plummeting value of the pound as the majority of its revenue is earned in US dollars, flattering the company’s bottom line, which is reported in sterling.
Pre-tax profit climbed to £837 million from £619 million a year earlier. Excluding one-off items, it was £1.7 billion.
The bank announced it had set aside an extra £600 million to pay back customers for selling them payment protection insurance (PPI) they didn’t need, couldn’t use or didn’t want.
The sum is more than predicted and means Barclays has earmarked £1 billion for payouts on the scandal in the past 6 months alone.
The banking industry has been trying to put an end to one of the biggest scandals in UK corporate history, having paid back more than £30 billion to customers since 2011.
The Financial Conduct Authority (FCA) has put a June 2019 deadline on claims in an effort to draw a line under the long-running affair.
Yesterday, Barclays agreed to settle US litigation by investors who say they lost money when banks including Barclays allegedly conspired to rig the Libor benchmark interest rate.
In June 2012, Barclays reached a $453 million settlement and entered a non-prosecution agreement with global regulators to resolve Libor manipulation charges.
In a bid to boost the bank’s flagging share price, chief executive Jes Staley and his predecessor have cut 14,500 jobs across the world, stripped out costs and attempted to focus on the UK and US. Barclays’ has pulled its investment bank out of seven countries in Asia, and slimmed down its century-old African business.
Its shares have fallen 17 percent this year, having recovered 43 per cent since hitting a nadir fours days after the Brexit vote.
Barclays is also weighing how to deal with the post-Brexit reality, which will leave London banks shut of the single market unless Theresa May’s government can avert a hard Brexit and obtain special concessions for the industry.
Laith Khalaf, senior analyst at Hargreaces Lansdown saaid: “Despite the bank’s international exposure, it is still vulnerable to poor economic conditions in the UK, so if we do get a Brexit-induced slowdown, Barclays will feel the burn.”
