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Barclays see-sawed in the hours after its quarterly earnings release, with shares ultimately ending the day’s trade in the red. The British bank reported a first quarter (Q1) loss of £236 million, swinging from a profit of £1.68 billion in the same period last year. A £1.4 billion settlement with the US Department of Justice relating to legacy mortgage-backed securities mis-selling was to blame. The bulls argue that by stripping out the charge, Barclays’ net profit more than doubled and beat the Street.
Meanwhile, there was an unexpected sharp rise to £400 million in charges relating to payment protection insurance (PPI) as the deadline for claims draws closer next year, which took analysts by surprise. Barclays stuck to its plans to pay a 6.5p dividend this year. In the quarter it was announced that CEO Jes Staley would have to pay a fine over the recent whistleblower episode. This comes as a positive development for Barclays, as it was feared he could have lost his job.
Lloyds reported pre-tax profit up 23% to £1.6 billion, from £1.3 billion last year; slightly below expectations. Net interest margins (NIM) were a bright spot, increasing from 2.8% to 2.93%.
The UK lender announced another £90 million provisions for the PPI mis-selling legacy issue. The bank announced a three-year digitalisation investment plan earlier this year, worth £3 billion, as it looks to put the PPI scandal behind it and take part in a broadening trend of increased investment in technology. Recently, Lloyds announced further job cuts and branch closures as it aims to slim down costs.