Barclays Warns Over U.K. Economic Uncertainty

By Margot Patrick 

Barclays PLC said a dimming economic outlook in the U.K. would make it harder for the bank to meet a key financial metric next year, as it took a GBP1.4 billion ($1.8 billion) hit to its profit by reimbursing customers who were wrongly sold insurance on its products.

The bank posted a GBP292 million net loss in the third quarter, down from last year's GBP1.05 billion net profit, mainly because of the charge for reimbursing payment protection insurance. U.K. banks are nearing the end of a yearslong program to reimburse customers who were wrongfully sold insurance on bank products.

Chief Executive Jes Staley said Barclays is on track to meet a 9% target this year for returns on tangible equity, a closely watched measure. The bank continues to target a 10% ROTE for next year, Mr. Staley said, but that the outlook is more challenging, "in particular given the uncertainty around the U.K. economy and the interest-rate environment."

Mr. Staley is trying to improve returns to boost the bank's share price, which has sunk in his four years as CEO. An activist investor, Sherborne Investors, wants it to scale back in investment banking, but Mr. Staley on Friday said its business model combining U.K. banking, U.S. credit cards and investment banking "allows us to weather today's macro headwinds."

Revenue rose 17% in the quarter in the corporate and investment bank and costs were flat from a year ago, lifting pretax profit in the unit to GBP900 million from GBP500 million.

After stripping out the PPI charge and other litigation costs, Barclays' net profit for the quarter was GBP1.23 billion, up from GBP1.14 billion in third quarter of 2018.

Write to Margot Patrick at [e-mail]

(END) Dow Jones Newswires

October 25, 2019 04:14 ET (08:14 GMT)

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