Thousands of Barclays’ business customers are to be given new bank sort codes by Easter 2018, the four-day weekend the bank intends to use to implement new rules to separate its high street arm from its investment banking business.
As the bank reported a 21% fall in first-half profits to £2bn, it emerged that it would use the Easter holiday to start pushing through the reforms designed by Sir John Vickers following the 2008 banking crisis which must be adopted by 2019. The reforms oblige banks to “ring-fence” their high street operations from their riskier investment banking operations.
Tushar Morzaria, Barclays’ finance director, compared the looming split to the uncertainty ahead of Y2K or the adoption of the euro and said other banks would also choose the same date in 2018. “That weekend we have to create a brand new bank, probably the largest bank that will ever be created in the UK”.
Barclays has not decided which customers will need new sort codes, but is keen avoid disruption to all 24m of them. The focus is expected to be business customers.
The bank’s chief executive, Jes Staley, said implementing the ring-fencing rules was more complicated than anything required to maintain Barclays’ investment banking business in the EU after the Brexit vote.
If a passporting deal – giving access to the remaining 27 members of the bloc – cannot be clinched, he said, operations might need to be beefed up in places such as Ireland. He played down suggestions that thousands of roles would move from London.
Staley also set out the case for UK banks to be given access to the EU. “The presence of Barclays in the European capital markets is important to Europe,” he said, adding that the bank had played a key role in helping Italian and Germany companies to raise money since 23 June.
The bank’s shares were the biggest risers on the FTSE 100 on Friday, gaining 6% to 155p even though profits were knocked by Staley’s plan to pull back from Africa and another £400m provision for payment protection insurance (PPI) mis-selling. The so-called non-core division reported a £1.9bn loss, denting the £4bn of profits in the continuing operations.
After numerous run-ins with shareholders and politicians over bonuses, Staley said the full-year numbers for 2016 would be higher than previous payouts. At the half year, staff costs were £4.6bn, up from £4.2bn.
A US banker who took over in December, Staley said Brexit would not mean he had to tear up his new plan to turn Barclays into a transatlantic bank. He said he was not planning a branch closure programme and would try not to close in small towns.
“If we’re the last branch in a small town we’re very sensitive to the social price of what it would mean closing that,” he said.
He said customer activity had “paused” after the referendum result, but insisted it was not a re-run of the 2008 crisis when banks refused to lend. “One of our goals, in an environment like this, is we want Barclays to be a centre of stability. We want Barclays to be open for business,” he said.
“This is a political shock which has clearly challenged consumer and corporate confidence [but it has] not yet resulted in any credit deterioration.”
Pages of legal warnings attached to the half-year results remind investors that the bank remains under investigation by the Serious Fraud Office over the way it raised £7bn in capital during the 2008 banking crisis. The bank is contesting a £50m fine from regulators in relation to the matter, which was first disclosed in 2013.
