Barclays faces $590 million hit, scrutiny over sales slip-up By Reuters

By Iain Withers and Saqib Iqbal Ahmed

LONDON/NEW YORK (Reuters) -British financial institution Barclays (LON:) faces an estimated 450 million pound ($592 million) loss and regulatory scrutiny for exceeding a U.S. restrict on gross sales of structured merchandise, a few of which have surged in recognition since Russia’s invasion of Ukraine.

Barclays stated on Monday that it should delay a deliberate 1 billion pound share buyback as of the loss, which it should incur because of shopping for again the securities in query at their authentic buy value.

Shares in Barclays fell by as a lot as 4.5% after it stated it had oversold billions of kilos value of the securities over a interval of a few yr, overshooting a $20.8 billion restrict agreed with United States regulators by $15.2 billion.

The foremost regulatory blunder is an early embarrassment for C.S. Venkatakrishnan, the newly-appointed chief govt of Barclays, whose earlier roles included heading up the financial institution’s world markets and danger operations.

The merchandise concerned embrace two exchange-traded notes (ETNs) linked to and market volatility, a supply acquainted with the matter stated. Barclays suspended gross sales and issuance of each this month.

Earlier than gross sales had been suspended, the so-called VXX product had surged in recognition as traders positioned bets on volatility because the Ukraine disaster roiled world markets, with the variety of shares altering arms day by day doubling to 71 million in a month.

Barclays stated on the time that capability points had been accountable and the actions weren’t linked to the disaster in Ukraine.

The financial institution stated on Monday its greatest estimate was that the loss on the affected securities would quantity to 450 million kilos, slicing its core capital ratio to the center of its 13-14% goal vary. The loss estimate didn’t embrace tax.

Barclays stated it could delay its share buyback till the second quarter of the yr in consequence.

It stated that it had commissioned an unbiased evaluation, whereas regulators had been conducting inquiries and requesting data from the financial institution.

Barclays stated the securities had been registered on the market in August 2019, including that it could file a brand new registration with the U.S. Securities and Change Fee as quickly as practicable.

The broader funding financial institution had beforehand proved a stellar performer for Barclays over latest years, serving to it to put up a report annual revenue for 2021.

Analysts at Shore Capital stated in a notice that the financial institution gave the impression to be “tripping over its shoelaces”.

Whereas the present share buyback has solely been delayed, the error may cut back future capital distributions to shareholders by the financial institution, the analysts stated.

($1 = 0.7604 kilos)