London - Barclays shares rose to the highest in more than a year as its capital ratio climbed more than expected and the bank signalled progress in efforts to divest its Africa unit and sell off unwanted assets.
Fourth-quarter pretax profit was £330 million (R5.39 billion), from a loss of £2.1 billion a year ago, the London-based lender said on Thursday. Adjusted pretax profit of £284 million fell short of the £646 million average estimate of five analysts surveyed, as the firm took a charge for accelerating the costs of deferred bonuses.
The results mark the end of chief executive Jes Staley’s first year in charge, in which he rebuffed calls to spin off or radically shrink the investment bank, instead opting to speed up business sales and sell down the firm’s African business. The bank said yesterday it will close the unit that houses its unwanted assets six months earlier than expected, and that it reached a separation agreement with management of the Africa division.
“Management are continuing to deliver ahead of expectations on the restructuring plan,” JPMorgan Chase analysts led by Raul Sinha wrote in a note to clients. “The next leg of upside is dependent on earnings and dividend growth.”
Highest level
Shares of the British bank rose 3.1 percent to 242.45pence (R39.58) at 8.34am in London on Thursday, the highest level since October 2015.
The firm’s common equity Tier 1 ratio, a measure of capital strength, rose to 12.4 percent from 11.6 percent at the end of the third quarter. That surpassed analyst expectations for an 11.8 percent ratio.
“We look forward to ending the restructuring of Barclays that’s been going on for years in a matter of months,” Staley, 60, said. The firm has “resolved the issue of do we have the capital base to manage this bank going forward. I think we do and Africa is going to be an important part of that.”
Read also: Barclays to pay R13bn to split from African business
Fixed-income revenue jumped 33 percent to £766 million, while the five major US investment banks collectively posted a 43 percent jump. Analysts at Sanford C Bernstein and Deutsche Bank had expected income at the unit to climb by about 40 percent to £800 million, while those at Credit Suisse Group forecast a 52 percent gain to £875 million.
Equities trading revenue climbed 29 percent to £410 million, a bigger jump than analysts expected.
Bond-market volatility has been spurred by the UK’s surprise vote to leave the EU, the victory of Donald Trump in the US election in November and divergent views on the direction and timing of central-bank interest rates.
The charge on bonus deferrals was £395 million. Banks typically recognise the cost of deferred bonuses only when the awards vest, not when they’re first awarded. Barclays said, for 2016, it awarded more upfront bonuses and recognised the cost of awards sooner, leading to the charge.
Barclays will reintegrate the £25 billion of risk-weighted assets it expects to have left in its non-core unit at the end of June, instead of a previous target to close the unit with £20 billion at the end of the year. The division will generate about £1 billion of pretax losses this year, the bank said.
The bank said it’s awaiting regulatory approval on the separation agreement with Barclays Africa, which involves the UK lender paying £765 million.