Barclays says Bounceback loans price £4.8bn might by no means be repaid

Barclays has reported a giant drop in annual earnings, having put aside billions of kilos for loans anticipated to show bitter because of the pandemic.

The financial institution reported a 30% fall in pre-tax earnings to £3.1bn for 2020, down from £4.3bn in 2019.

It was pressured to put aside £4.8bn to cowl loans unlikely to be paid again amid the financial fallout of Covid.

Regardless of that the financial institution introduced it might resume dividends, with a cost of 1p per share to shareholders.

‘Resilient and diversified’

The financial institution has been one of many largest suppliers of emergency loans in the course of the coronavirus disaster, having given some £27bn price to companies.

It has additionally offered greater than 680,000 cost holidays globally for purchasers with mortgages, bank cards and loans.

Barclays warned that pandemic-related prices would stay excessive all through the approaching 12 months, however that it anticipated mortgage loss prices to be “materially beneath” final 12 months’s hit.

Some £492m was put aside to cowl anticipated defaults by debtors within the last three months of 2020, however that was down almost a fifth on the earlier quarter.

Barclays added that funding banking buying and selling had helped to offset the affect of the Covid disaster on its retail arm, with its “finest ever 12 months” for markets and banking revenue serving to to maintain the group in revenue.

“We count on that our resilient and diversified enterprise mannequin will ship a significant enchancment in returns in 2021,” group chief government Jes Staley stated.

Banking analyst Philip Augar stated that “it’s clearly not nice information” for the financial institution.

“I suppose the comfort for the financial system and for Barclays shareholders is that it may have been worse.

“The quantity that they’ve been offering in opposition to unhealthy loans has been much less, quarter by quarter, and that could be an indication that we’re previous the worst, however they’re fairly cautious in what they are saying.”

He added that he felt it was “prudent” for the financial institution to renew dividends funds to shareholders, after regulators permitted this in December.

Banks had been instructed to cease making the funds in March final 12 months so as to construct up capital to soak up potential mortgage losses attributable to the pandemic.

Along with the dividend, Barclays can be set to return money to traders by way of a share buyback (the place firms listed on the inventory market buy a few of their very own shares) of as much as £700m.

Barclays says Bounceback loans worth £4.8bn may never be repaid