Barclays yesterday posted a 25% first-quarter profits slump as the cost of the bank’s continuing overhaul weighed down its performance.
New figures showed adjusted pre-tax profits at the lender fell by a quarter to £1.8 billion for the first three months of the year, after £514 million of costs for the turnaround plan which it has dubbed ‘Transform’.
The bank also revealed rising bad debts in the UK and Europe, driven by higher defaults on unsecured loans in the UK and troubled Spanish and Portuguese mortgages.
Barclays, which has long been mired by the Libor-rigging scandal, has already revealed plans to axe 3,800 jobs this year and shrink its European retail banking operations under a drive to cut £1.7bn of costs by 2015.
It said that when excluding costs largely relating to the overhaul, underlying profits had swung to £1.5bn from a £525m loss a year ago.
Barclays said a good start to the year has continued into its second quarter, giving its shares an early boost of more than 2%.
Chief executive Antony Jenkins added that the bank was making good early progress with its overhaul, and expects another £500m of costs this year from the turnaround.
Bad debt charges in its UK retail and business banking arm increased £13m to £89m during the quarter as more people struggle to repay unsecured loans.
A £16m increase in European bad debt charges to £70m was blamed in part on the rising defaults on Spanish and Portuguese mortgages.
However, impairment charges across the group fell 10% to £706m, mainly reflecting improvements in investment and corporate banking.
Barclays last week announced the departure of flamboyant investment banking chief Rich Ricci, who will leave during the summer after 19 years at the lender and will be replaced by co-heads Eric Bommensath and Tom King.
But the banks was unable to provide an update on its search for a replacement for outgoing finance director Chris Lucas.
Nonetheless, Mr Jenkins said he was “comfortable with the team” he had to take the bank forward.
The bank did not increase its £2.6bn provision to cover mis-sold payment protection insurance, and said the volume of customer claims continued to fall in the first quarter.
It had used £1.9bn of this provision by the end of last month.
Barclays also held its level of provision for the mis-selling of interest rate swaps, after setting aside £850m last year to cover the scandal.