Barclays first quarter profits rise, books provisions for FX

Adjusted profits before tax at Barclays rose by 9% to £1.85bn over the first three months of the year.

That was better than the £1.6bn anticipated by analyst Mike Trippit at Numis.

However, statutory group profits decreased by 26% to £1.3bn, as adjusting items which in the year ago period led to a net gain of £119m this time around generated a net loss of £511m.

Troubling FX provisions

The increased FX provision is rather troubling

In the first quarter additional provisions of £800m were recognised for investigations and litigation primarily relating to foreign exchange, bringing the total tally thus far to £2.05bn.

Barclays booked another £150m PPI redress provision as the result of an updated estimate of future redress and associated costs.

The lender also took a non-cash charge linked mainly to the negative impact of foreign currency translations on reserves recycled upon completing the sale of its Spanish business.

Partially offsetting the above charges, a £429m gain was recognised as the valuation of a defined retirement benefit liability increased.

The bank's tangible net asset value (TNAV) increased to 288p per share from 285p one year back. Risk weighted assets were pared to £396bn from £402bn at year-end 2014.

The lender’s common equity Tier 1 (CET1) ratio strengthened to 10.6% from the comparable 2014 figure of 10.3%, as CET1 capital improved to £41.8bn from £41.5bn.

On an adjusted basis, the return on average tangible shareholders' equity increased to 8.8% from 7.6% one year ago.

Commenting on the results, Tribitt said: "TNAV and CET 1 improved in spite of increased litigation and conduct provisions. Investment Banking performance was in-line with peers, with a substantial rebound in Equities and Macro. The increased FX provision, unaccompanied by further news-flow is rather troubling."

Nonetheless, Tribitt kept his buy recommendation and 315p target price on the shares.

As of 08:02 shares of Barclays were 1.49% lower to 257.45p.