Barclays’ turnaround plan puts big dent in first quarter profits

Barclays’ first quarter profits have slumped by a quarter as the cost of its overhaul weighs on the bank.

Adjusted pre-tax profits at Barclays fell 25 per cent to £1.8bn in the first three months of the year, after £514m of costs for its ‘Transform’ turnaround plan.

The bank also revealed rising bad debts in the UK and Europe, driven by higher defaults on unsecured loans in the UK and troubled Spanish and Portuguese mortgages.

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Barclays, which has been mired by the Libor-rigging scandal, has already revealed plans to axe 3,800 jobs this year and shrink its European retail banking operations under a drive to cut £1.7bn of costs by 2015. It said that when excluding costs largely relating to the overhaul, it swung to underlying profits of £1.5bn from £525m losses a year earlier.

Barclays said a good start to the year has continued into its second quarter, giving its shares a boost of more than 2 per cent.

Chief executive Antony Jenkins added the bank was making good early progress with its overhaul, and expects another £500m of costs this year from the turnaround.

He said: “In our goal to become the ‘Go-To’ bank we have not chosen an easy path for Barclays, but we have chosen the right one.”

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Bad debt charges in its UK retail and business banking arm increased £13m to £89m during the quarter as more people struggle to repay unsecured loans. A £16m increase in European bad debt charges to £70m was blamed in part on rising defaults on Spanish and Portuguese mortgages.

However, impairment charges across the group fell 10 per cent to £706m, mainly reflecting improvements in investment and corporate banking.

Barclays last week announced the departure of flamboyant investment banking chief Rich Ricci, who will leave during the summer after 19 years at Barclays and be replaced by co-heads Eric Bommensath and Tom King.

Mr Jenkins said: “I’m comfortable with the team we’ve got in place to take the bank forward.”

The bank did not raise its £2.6bn provision to cover mis-sold payment protection insurance.