Barclays profit dented after $2 billion cost of blunder

Barclays' first half profit fell more than expected due to a 1.9 billion pound ($2.3 billion) hit for regulatory misteps mostly from covering the costs of having to buy back billions of dollars worth of securities it sold in error.

The British lender on Thursday reported profits before tax of 3.7 billion pounds for the first six months of the year, down from 4.9 billion pounds in the same period a year ago and just below the average of analysts' forecasts of 3.9 billion pounds.

Despite the higher regulatory costs the bank said it would pay out a dividend of 2.5 pence per share and launch a buyback of 500 million pounds.

The bank's shares fell 1% in early trading. Litigaton and conduct charges in the first half were 1.9 billion pounds.

The results were marred by a fresh 1.3 billion pound charge to cover the costs of buying back $17.6 billion worth of securities it sold in breach of U.S. regulations, in an error that has blighted CEO C.S. Venkatakrishnan's first year in office.

The impact would have been worse but for a 758 million pound gain made on a hedge placed by Barclays against losses arising from the error, the bank said, adding that the net hit to its financials was a 580 million pounds.

The lender said its total balance sheet provision for the error as of June 2022, including previous charges, had ballooned to 1.8 billion pounds ($2.19 billion).

The bank said on Monday it will on Aug. 1 begin buying back the investment products. Barclays said in March it had oversold a range of complex structured and exchange-traded notes, breaching limits agreed with U.S. regulators.

Barclays also became the latest bank to be involved in US regulator investigations into non-compliant use of communications tools by staff, which it said would cost a total of $200m.

The bank said it had reached an agreement in principle with the Securities and Exchange Commission and the Commodity Futures Trading Commission this month to resolve the matter, with the final penalties expected to be paid in the third quarter.

INVESTMENT BANK

Barclays' investment banking unit reported a strong performance, with income from its global markets trading division up 48% to 5.6 billion pounds in the first half.

Barclays' fixed income, currencies and commodities business, seen by analysts as its traditional trading powerhouse, reported income up 51% due to higher levels of activity as clients traded in volatile markets.

Equities income meanwhile rose by 754 million pounds, almost entirely due to hedging arrangments the bank put in place to mitigate against the costs associated with its securities-over issuance.

The bank had previously said it was exposed to falls in stock markets as it prepared to buy back the securities it over-issued at their original price, and would put in place a hedge to protect against that.

Banking advisory fees income decreased 31% as the flow of deals collapsed amid market uncertainty caused by the Ukraine war and sharply rising interest rates.

($1 = 0.8214 pounds)