Barclays shares were reeling on Wednesday after the UK bank revealed a disappointing set of results for the 2022 full year. Fears of lower net interest margin and litigation costs were the source of investors discontent and shares in the bank fell over 8% in early trade.
Although Barclays top line income was 14% than last year at £25bn, increased costs due to litigation and impairment charges meant Barclays profit before tax fell 14% to £7bn.
Profit before impairment charges was £8.2bn but macroeconomic deterioration meant the bank set aside £1.2bn for credit impairments.
Barclays also incurred a £1.6bn charge due to the over-issuance of US securities.
“Barclays has bitterly disappointed the market with its full year numbers. Profits have been stunted partly because of a big increase in litigation costs relating to the over-issuance of US securities,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.
“This costly mistake has been known about for some time, but these are now the hard consequences biting the bottom line. Barclays is more than able to stomach this financially, the wider-reaching difficulties come from reputational damage. The tolerance margin for a similar mistake is now very thin.”
Net interest margins grew to 3.54% to 2022 but Barclays cast a doubt over the coming year’s earning potential as they said they expected Net Interest Margins would be above 3.20% – a target that could see Barclay’s NIM fall in the year ahead.
Barclays have increased their distributions to shareholders but the £500m buyback is below expectations.