Barclays’ shares down on buyback delay

Barclays shares fell 4% on Monday after the company revealed it would have to delay its share buyback scheme. The UK banking giant was forced to halt the £1bn programme after it took a £450m hit on a $15bn historical trading error.

In August 2019, Barclays mistakenly issued $15.2bn more in exchange traded notes in the US than the $20.8bn it had registered to. The bank says it will rectify the error, which relates to its VXX and oil notes, by buying them back from clients at the original purchase price. The notes mimic Vix volatility futures and crude oil price fluctuations.

“Barclays has commissioned an independent review of the facts and circumstances relating to this matter including, among other things, the control environment related to such issuances,” the company said in a statement. “Separately, regulatory authorities are conducting inquiries and making requests for information.

“BBPLC intends to file a new automatic shelf registration statement with the SEC as soon as practicable. Barclays remains committed to its structured products business in the United States.”

Barclays’ trading blunder

The bank is currently under investigation by the US Securities and Exchange Commission for the trading error. Barclays says the hit will also affect the bank’s common tier 1 ratio – a measure of its financial financial stability.

Meanwhile, the share buyback programme has been rescheduled to begin in the second-quarter, management said. Commentators say that the situation will represent a major test for new chief executive C.S. Venkatakrishnan, who was previously responsible for heading up Barclays’ global markets and risk operations.

Joseph Dickerson, an analyst at Jefferies, said it was “an unhelpful matter” and that the regulatory scrutiny was likely to “weigh on sentiment”.

Stake sell-off hits Barclays’ shares

In a further blow, on Monday evening an unnamed investor sold off a £900m holding in the bank, sending the shares down as much as 6% in early trading on Tuesday. The stake was thought to be worth around 3.6% of Barclays share capital and the shares were sold at a discount, according to financial market data firm Refinitiv. Shares finished trading down 3% to 156p.

Analysts at JP Morgan Chase also downgraded the shares to neutral, cutting its price target from 220p to 170p.

Barclays’ shares have fallen 28% this year in the wider market sell-off since reaching a high of 217p in January. Full-year and fourth-quarter results for 2021 beat analyst expectations. Yet, Venkatakrishnan struck a more cautious tone for the year ahead at the results.

“Looking ahead into 2022, we are focussed on delivering consistent performance and returns across our businesses, supported by robust management of our balance sheet, costs and controls,” he told investors.

“We recognise that the economic environment is more than usually uncertain, with rising inflation rates and tighter monetary policy, while many parts of society continue to recover from the severe social and economic effects of the COVID-19 pandemic.”

Investors will hear more at the bank’s first-quarter results due in late April. However, for now, the share price slump offers a long-term buying opportunity.

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