Barclays likely hit by bad loan losses in Q1 results

The UK lender will unveil its first quarter results on Wednesday, with British banks likely to suffer significant losses from bad loans this earnings season.

Barclays will unveil its first quarter (Q1) results on Wednesday 29 April, though investors are expecting it and other UK banks to be hit hard by bad loans, damaging their respective capital positions amid the Covid-19 crisis.

Acting proactively, the Bank of England (BoE) has urged Barclays and other UK lenders to be lenient on borrowers and show restraint in booking charges for bad debts in a bid to shore up their balance sheets.

Across the Atlantic, the top six largest US banks have allocated over $25 billion in total for the first quarter in preparation of major losses as a consequence of the economic fallout from the viral pandemic.

As a result, the BoE is concerned that UK banks will take similar action which would significantly hinder their ability to lend to businesses in desperate need of cash.

Investors are eagerly awaiting Barclays and other UK banks earnings to see just how much the coronavirus outbreak has impacted their financial performance and their ability to support the wider economy.

PRA requests UK banks suspend dividend

Much to the disappointment of shareholders, Britain’s largest lenders complied with guidance from the Bank of England (BoE) and suspended dividend pay-outs in 2020.

The Barclays, Lloyds, Royal Bank of Scotland, HSBC, Santander and Standard Chartered all said that they would cancel their dividends for the 2019 financial year and agreed to refrain from making any pay-outs to shareholders in 2020. The banks even promised to cancel any share buyback initiatives too.

The Prudential Regulation Authority (PRA), the supervisory division of the BoE, welcomed the dividend cancellations and not having to take any formal action against any UK banks.

The PRA hopes that by keeping cash on lenders balance sheets, rather than in shareholders pockets, it will help the industry offset some of the impact of the Covid-19 crisis.

The regulator also expects banks not to pay any cash bonuses to senior staff over the coming months.

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