British bank Barclays is apparently still suffering the cost of an $361 million administrative error.
The bank on Wednesday released a full-year earnings report showing a net profit of $7.2 billion, down 15% from the prior year. Earnings were impacted by a $1.4 billion credit impairment charge that reflects “macroeconomic deterioration.”
“Barclays has bitterly disappointed the market with its full-year numbers,” Sophie Lund-Yates, lead equity analyst at asset manager Hargreaves Lansdown, wrote in a widely reported note after the company’s stock dropped nine points.
“Profits have been stunted partly because of a big increase in litigation costs relating to the over-issuance of U.S. securities.”
That increase was part of a 14% jump in Barclay’s operating costs, as it spent $1.9 billion in litigation costs and fines, resulting from a $361 million penalty paid to the Securities and Exchange Commission (SEC) last year.
The SEC charged the bank in September with “the unregistered offer and sale of an unprecedented amount of securities” — $17.6 billion — thanks to what the commission said was a failure to offer internal controls that could track those transactions in real time.
“This case highlights why it is essential for firms like Barclays to have robust internal controls over their offers and sales of securities,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said at the time.
“While we acknowledge Barclays’ efforts to identify, disclose and remediate this conduct, the control deficiencies and the scope of the conduct at issue here was simply staggering.”
PYMNTS reported in December that Barclays had been fined $10.26 million by the U.K.’s Payment Systems Regulator (PSR).
The PSR said the fine was in response to Barclays’ failure to adhere to interchange fee regulation by not giving retailers complete information on the costs of its card services.
“This meant retailers were unable to easily understand the transaction fees associated with accepting certain types of card payments,” the PSR said.
The fine followed an earlier PSR investigation which found there was a three-year period in which Barclays did not properly clarify to retailers the transaction fees associated with accepting different types of card payments.
During this time, the regulator said Barclays processed a third of all card transactions in Great Britain, impacting thousands of merchants.
Last year also saw Barclays — along with the U.K.’s three other largest banks — enjoy a surge of income capitalization thanks to interest rate hikes by the Bank of England.
The increase let the banks capitalize on the increase in the difference between what they charge borrowers and what they pay out to savers, PYMNTS reported in November.