Barclays 2013 Profit Declines 26%, Missing Estimates

Barclays Plc reported full-year profit that missed analyst estimates as litigation and compensation charges complicated Chief Executive Officer Antony Jenkins’s overhaul of Britain's second-biggest bank by assets.

Adjusted pretax profit for 2013 was 5.2 billion pounds ($8.5 billion), London-based Barclays said in a statement today. That’s 26 percent down from 7.05 billion pounds in 2012 and missed the 5.4 billion-pound consensus analyst estimate compiled by the bank. Barclays didn’t provide further details in the statement, released a day before it was scheduled to publish full-year results.

Barclays raised about 5.8 billion pounds from investors in a rights offering last year to appease regulators’ concerns about the bank’s capital strength. Jenkins, 52, is cutting jobs, including hundreds of positions at the investment banking operation, to remove 1.7 billion pounds of costs by 2015.

“It’s difficult to say because of a lack of detail, but if the miss is because of costs to achieve” Jenkins’s overhaul plan, “then we will take that as a positive,” said Vivek Raja, a banking analyst at Oriel Securities in London who rates the bank a buy. “Barclays would be accelerating the program and that should quell concerns about capital and the balance sheet.”

The stock rose 1.2 percent to 275 pence in London trading today, for a market value of about 44.3 billion pounds. The shares are up about 1.1 percent this year.

‘Cost Overrun’

“Any marginal disappointment against wider sell-side expectations will have come within Barclays Capital,” the investment banking unit, wrote Ian Gordon, an analyst at Investec Plc with a buy rating on the stock. The unit probably caused the bulk of a “cost overrun,” in the fourth quarter, he wrote in a note to investors.

Jenkins, who is struggling to restore trust in the bank following a series of scandals, said last month it would take a 330 million-pound charge relating to penalties and lawsuits in the fourth quarter. Today’s release of earnings comes a day after the bank said it’s in talks with regulators about a possible criminal leak of client account information.

As many as 27,000 customer files containing personal and financial information were taken, the Mail on Sunday reported yesterday, citing an unidentified whistle-blower. It’s unclear how the files were stolen, the newspaper said, adding data was sold to brokers to be used for “investment scams.”

Regulatory Probe

Barclays has also said it’s being probed by regulators over whether it properly disclosed 322 million pounds of payments to Qatar’s sovereign wealth fund as part of a 7 billion-pound fundraising during the financial crisis, a move that helped the bank avoid a government bailout. The U.K. markets regulator said last year it may fine the bank 50 million pounds. Barclays said in October it’s still contesting the findings.

Statutory pretax profit rose to 2.9 billion pounds, the company said today. That’s up from 246 million pounds in the year-earlier period. The bank released the data after the Financial Times reported the figures earlier today.

Barclays had 364 billion pounds of derivative assets in the third quarter under the latest rules set by the Basel Committee on Banking Supervision. That could require as much as 14.6 billion pounds of capital, assuming 4 percent equity to assets, estimated Jonathan Tyce, a senior banks analyst at Bloomberg Industries in London.

“The thing the market needs answering is how much the bank actually generates from those assets, and is it worth the multi-billion associated capital charge,” Tyce said.

Investors will also look for more details on litigation expenses and costs at the investment bank if Barclays looks to “materially restructure” it, Tyce said.