Barclays faces $590 million loss, scrutiny over sales slip

Barclays bank branch in London, Britain, February 23, 2022. REUTERS/Peter Nichols

LONDON/NEW YORK (Reuters) – British bank Barclays is facing an estimated loss of 450 million pounds ($592 million) and regulatory scrutiny for exceeding the United States’ limit on sales of structured products, some of which have grown in popularity since the Russian invasion. Ukraine.

Barclays (Barkel) It also said on Monday that it would have to delay the planned £1 billion share buyback from the loss, which it would have to incur as a result of buying back the securities in question at the original purchase price.

Shares in Barclays closed 4% lower after the bank said it had oversold billions of pounds worth of securities over nearly a year, exceeding the $20.8 billion limit agreed with US regulators by $15.2 billion.

The big organizational blunder is an early embarrassment for CS Venkatakrishnan, the newly appointed chief executive of Barclays, whose previous roles have included managing the bank’s global markets and risk operations.

Analysts at Shore Capital said in a note that Barclays appeared to be “stumbling on its shoelaces”.

The broader investment bank had previously demonstrated an stellar performance for Barclays in recent years, helping it post record annual profits for 2021. Read more

Sure Capital analysts said that while the buyback of existing shares has only been delayed, the error could reduce future capital distributions to shareholders by the bank.

In another blow after the London market closed, a Goldman Sachs note seen by Reuters showed that the US investment bank was instructed by a major investor in Barclays to sell a large portion of the shares in the bank.

The target price range for selling 575 million Barclays shares was 6.1-8.1% below the closing price, a factor likely to put further pressure on the stock price when it opens on Tuesday. Read more

volatility bets

A source familiar with the matter said the products in question include exchange-traded bonds (ETNs) linked to crude oil and market volatility. Barclays halted sales and release of both this month. Read more

Before the suspension of sales, the popularity of the so-called VXX product soared as investors bet on volatility as the Ukraine crisis ravaged global markets, with the number of shares traded daily doubling to 71 million in a month.

Barclays said at the time that capacity issues were to blame and that these actions were not linked to the crisis in Ukraine.

On Monday, the bank said its best estimate was that the loss on the affected securities would reach 450 million pounds, bringing the core capital ratio to the middle of the target range of 13-14%. The loss estimate does not include taxes.

Barclays said it would delay its share buyback until the second quarter of the year as a result.

It said it had commissioned an independent review, while regulators were making inquiries and seeking information from the bank.

Barclays said the securities were registered for sale in August 2019, adding that it will file a new registration with the US Securities and Exchange Commission as soon as practicable.

(dollar = 0.7604 pounds)

(Ian Withers reports in London and Saqib Iqbal Ahmed reports in New York.) Editing by John O’Donnell, Edmund Blair and Alexander Smith

Our criteria: Thomson Reuters Trust Principles.