Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
“This is a highly embarrassing turn of events for Barclays and has been reflected in a sell off today of shares. The stock opened down around 5% with investors clearly irked about the mismanagement of the structured product sales and the quick fire purchase, which sees the bank nursing a heavy loss. The delay of the bumper £1 billion share buy back has also rattled shareholders. The bank now needs a reputation reboot for its investment arm, which had been the shining light during the dark days of the pandemic, when the sharp increase in trading helped offset the provisions for bad loans. An internal and external inquiry is now underway into the bond blunder, in addition to the ongoing FCA probe into former CEO Jes Staley’s relationship with disgraced financier Jeffrey Epstein. It’ll take some time for these clouds to lift, but the underlying performance of the business is positive, and the bank is well capitalised, with a CET1 radio higher than the regulatory minimum. It is also well diversified and the prospect for higher interest rates should help boost its net income margins. But there is a risk that soaring inflation and sluggish growth could start tightening their purse strings again and when customers are nervous, card balances get paid down faster, resulting in reduced interest income. So it’s not going to be plain sailing ahead given the added reputation issues it’s now saddled with.”
