- Bank’s money-laundering systems under fire
- Lender has just settled mis-selling claims
- Investor attention is on next week’s results
UK banks haven’t exactly distinguished themselves in recent years when it comes to keeping accurate records of who their customers are, so it’s no great surprise Barclays (BARC) finds itself being probed for major failings in its compliance and anti-money laundering systems, according to a report in the Financial Times.
Shares in the bank, which have enjoyed a mighty rally from their October low of 135p, eased 3.2p or 1.7% to 186.5p, suggesting shareholders either aren’t bothered or are more interested in next week’s results and news of another share buyback.
NO STRANGERS TO CONTROVERSY
This isn’t the first time Barclays has been ‘up before the beak’, indeed it has only just put aside £1.3 billion for a fine from the US financial regulator for product mis-selling.
According to the Financial Times, the Financial Conduct Authority issued a notice in Spring 2022 ordering an independent review of the bank’s systems for detecting and preventing financial crime ‘after becoming concerned about the amount of know-your-customer and anti-money laundering incidents’.
The paper adds that while the cases were relatively minor on an individual basis, collectively they added up to ‘a concerning pattern’ in the eyes of the regulator.
Just over a year ago, NatWest (NWG) was fined £265 million for anti-money laundering offences after it failed to prevent a £365 million money-laundering scheme which notoriously involved £700,000 in cash being carried through a shopping centre in black bin bags.
At the same time, Santander UK paid a fine of more than £100 million for failing to monitor its systems properly and not picking up suspicious transactions, while HSBC (HSBA) was fined £64 million for ‘serious weaknesses’ in its anti-money laundering processes over an eight-year period to 2010 including holding an account for a criminal gang leader.
ROLL ON THE RESULTS
Despite the prospect of more fines and sanctions, however, Barclays shareholders seem more interested in the company’s results which are due on 16 February.
Analysts are forecasting fourth-quarter pre-tax profits of £1.5 billion against £1.4 billion a year earlier, and full-year profits of £7.2 billion compared with £8.4 billion.
There will also be a focus on the bank’s net interest margin, or the difference between the interest rate it pays on deposits and the rate it charges on loans.
Higher interest rates should have led to an increase from the 3% level the bank reported in the third quarter, and even if the uplift is only 0.1% or 0.2% Barclays has a £414 billion loan book so each basis point of net interest margin, or one one-hundredth of a percentage point, could in theory equate to around £40 million in extra profit.
Provisions for estimated credit losses is another area of focus, with analysts looking for another increase to £504 million in the fourth quarter to take the cost for the whole of 2022 to £1.2 billion.
Meanwhile, the lack of corporate deals in the final three months of last year means fourth-quarter and full-year profits at the investment bank are likely to be lower, with analysts forecasting £4.4 billion pre-tax in 2022 against £5.6 billion in 2021.
Finally, on top of a total dividend for the year of 7.05p per share, investors will be hoping for another round of share buybacks to help boost their total returns.
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