Barclays overhaul hits profits

BarclaysBarclays' 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% to £1.8 billion in the first three months of the year, after £514 million 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.

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 £1.7 billion of costs by 2015. It said that when excluding costs largely relating to the overhaul, it swung to underlying profits of £1.5 billion from £525 million 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%.

Chief executive Antony Jenkins added the bank was making good early progress with its overhaul, and expects another £500 million 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."

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

However, impairment charges across the group fell 10% to £706 million, 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.
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