Barclays kicks shareholder goodies into long grass again after $15bn trading blunder

British banking giant Barclays has kicked its share buyback programme into the long grass for the second time after it booked huge costs to draw a line under an unprecedented trading blunder, it announced today.

The lender last month said it had sold more than $15bn (£12bn) of financial products than it was allowed to, triggering a probe by the US markets watchdog the Securities and Exchange Commission (SEC) and a possible restatement of its accounts.

Barclays said “it is prudent to delay the commencement of the buyback programme” until the probe by the SEC has finished, marking the second time it has kicked back goodies for shareholders.

The lender said it had spent £500m on hiring lawyers and litigation costs to deal with the trading mishap.

The delay will pile early pressure on the lender’s new chief, C. S. Venkatakrishnan, known as Venkat, who was parachuted in after former boss Jes Staley quit last year to fight the findings of an investigation by City regulators that found he failed to full disclose his relationship with convicted sex offender Jeffrey Epstein to the bank’s board.

Despite the move, Barclays’s share price jumped 2.35 per cent due to profits beating the City’s estimates.

For the first three months of the year, the lender raked in £2.2bn in pre-tax profits. Profits attributable to shareholders came in at £1.4bn in the first quarter.

The lender’s chief warned that the cost of living crunch is likely to lead to an uptick in financial distress, an alert also issued by Barclays’s banking rivals this week.

“We remain focused on the impact higher prices are having on our customers and our small business and corporate clients, all of whom are facing far harder conditions this year as a result of inflation, supply chain issues and higher energy costs,” Venkat said.

UK banks’ first quarter earnings season has been mired by senior management warning that borrowers may struggle to service debts due to historic high inflation pinching their finances.

Inflation is running at seven per cent, the highest level in 30 years, but is expected to trend much higher and possibly peak at 10 per cent in October.

HSBC and Lloyds have both booked provisions to cope with an expected uptick in defaults off the back of the cost of living crisis.

Lenders have, however, been boosted by the Bank of England hiking interest rates at each of its last three meetings to douse down inflation, taking them to pre-pandemic levels of 0.75 per cent.

Banks benefit from higher rates as they allow them to charge more for loans.

Barclays’s net interest margin – the difference between what a bank charges borrowers for credit and what it pays out to depositors in interest – widened 0.08 percentage points to 2.62 per cent in the first quarter of the year.

Its CET 1 ratio, a measure of the strength of a bank’s balance sheet, edged down to 13.8 per cent from 15.1 per cent in the previous quarter, but was still well within regulatory limits.