Income from its personal banking division, which includes mortgage lending, rose 11 per cent to £1.02bn which it said was driven by rising interest rates and strong mortgage origination in 2021.
Loans and advancements to customers fell by one per cent to £207.3bn. Despite a £1bn growth in mortgage lending, this was offset by a £2.3bn decline in business banking balances following the repayments of government loans. Net mortgage balances rose £1bn quarter-on-quarter and £7.2bn annually.
Barclays’ current UK mortgage balance is £159.1bn, up from £158.1 in the previous quarter and flat on the same period last year.
The UK division’s net interest income rose five per cent to £1.3bn during the period with a net interest margin of 2.62 per cent. It said this was primarily driven by the UK’s rising rate environment.
The wider business
The Barclays group reported a seven per cent decline in profits, down to £2.2bn.
Its costs amounted to £4.1bn including litigation, conduct charges of £500m relating to the over-issuance of securities by its US business, and customer remediation costs. Last year, the bank was fined £783,800 by the Financial Conduct Authority for failing to properly oversee its business with Premier FX.
C. S. Venkatakrishnan, group chief executive of Barclays, said: “Our performance includes the relevant costs relating to the over-issuance of securities in the US and customer remediation of a legacy loan portfolio.
“Our income growth was driven partly by global markets, which has been helping clients navigate ongoing market volatility caused by geopolitical and economic challenges including the devastating war in Ukraine, and by the impact of higher interest rates in the US and UK.”
Venkatakrishnan also noted the cost of living crisis, saying the bank was ready to support its customers.
He said: “We remain focused on the impact higher prices are having on our customers and our small business and corporate clients, all of whom are facing far harder conditions this year as a result of inflation, supply chain issues and higher energy costs.
“We will support them through this difficult period wherever we can, and support the wider economy just as we did through the Covid-19 pandemic.”
Lenders and housing associations speaking on panel sessions at Just Mortgages’ inaugural new build and affordable housing event said brokers should prepare for an increase in shared ownership enquiries, especially as Help to Buy is due to end next year.
Furthermore, they said housing associations are expected to build more shared ownership houses and increasing numbers of lenders are predicted to enter the space.
However, panellists said there needed to be more consumer awareness and understanding of shared ownership, so brokers had a key role to play in educating borrowers.
Panellists also noted that there were multiple affordable housing options which borrowers should consider, including Deposit Unlock, private equity loan schemes, the mortgage guarantee scheme and First Homes scheme.
Lenders speaking on the three panel sessions during the day included Barclays, Halifax, Nationwide, Santander, Leeds Building Society, Skipton Building Society, Kent Reliance and Kensington Mortgages.
Housing associations and property providers on the panels included Sage Housing, SO Resi Partnerships, NU Living and Swan Housing.
John Doughty, financial services director at Just Mortgages New Build Division, said: “Lenders and brokers are getting less Help to Buy enquiries from customers as restrictions were introduced a year ago and the scheme nears the end of its shelf life. Instead, we are talking to more people wanting to know if they are eligible for shared ownership.
“I would like to take this opportunity to thank all the lenders, housing associations, property providers and developers for their participation in our event during what was a thought-provoking and successful day.”
Shared ownership currently accounts for two per cent of housing stock and the government has pledge funding for up to 90,000 new shared ownership properties over the next five years.
It is the third of the top five commercial lenders to partner with Groundsure, with the other two being Barclays and Natwest and RBS Group.
Working in conjunction with Santander, Groundsure created a Siteguard Climate Report, which includes a four-tier risk assessment summary with judgments on environmental liability, loan security risks and potential property value impacts.
It includes bespoke recommendation from Groundsure and was created with the banks “specific requirements with its valuation network”.
Dan Montagnani, chief executive of Groundsure, said: “We are delighted to be working with Santander to support their due diligence on their commercial property transactions.
“Siteguard Climate is an attractive proposition for banks to manage their current and forward exposure to environmental risks, especially in the context of greater compliance and due diligence requirements.”
He said: “With the Bank of England having set out its expectations on banks embedding their approaches to climate related financial risk, we are helping Santander to meet their compliance obligations and to ensure they are well positioned to manage this at scale for their commercial portfolio.”
Barclays agreed to cover more than £10m in losses by Premier FX customers.
The financial regulator said that Barclays, Premier FX’s sole banker in the UK, had neglected to identify that internal controls at the payments firm were deficient and that Barclays had failed in this case to conduct its business with due skill, care and diligence.
While the liquidator was to distribute 9p for every £1 customers had lost, Barclays has agreed to make up the difference with what the FCA said was a voluntary payment of £10,076,943.75, meaning that the 167 Premier FX clients whose claims had been accepted by liquidators would have 100 per cent of their money returned.
Mortgage Solutions approached Barclays for comment. A spokesperson for the bank responded: “Barclays has reached a resolution with the FCA following an investigation into its oversight and monitoring of a former customer, Premier FX Limited. As part of this resolution, Barclays has agreed to pay a penalty of £783,800 and make an ex gratia payment to be distributed amongst Premier FX’s customers.
“Barclays fully cooperated with the FCA’s investigation.”
The FCA said the Barclays payment would be sent by the liquidators by the end of next month and that the fine ended the watchdog’s investigation into Premier FX and associated parties.
The FCA publicly censured Premier FX in February 2021 for failing to safeguard its customers’ money and seriously misleading them about the services it was authorised to provide.
The regulator said that Premier FX had seriously misled customers on three levels, falsely telling them that it could hold their funds indefinitely without the need for a payment order for onward transfer; that their funds would be held in secure, segregated client accounts; and that their funds would be protected by the Financial Services Compensation Scheme (FSCS).
Mark Steward, executive director of enforcement and market oversight for the FCA, said: “Premier FX, which handled money on behalf of other people, presented particularly high risks of financial crime and fraud. Barclays was aware of these high risks in providing banking services to Premier FX but failed to take reasonably appropriate steps to mitigate those risks.”
He added however, that Barclays’ agreement to “meet the deficiency in Premier FX’s funds mitigates the actual losses to Premier FX’s customers” and was “a significant step to the credit of the bank” and one which “has reduced substantially the sanction that otherwise would have been imposed.”
This is up from £148.3m in December 2020 and £143bn in the same period in 2019. It said was due to a “strong flow of new applications” and “strong customer retention”.
The report said there had been a near eight per cent growth in residential loans, whilst buy to let had “remained broadly stable”.
It added that owner-occupier interest-only home loans made up 19 per cent of total balances, down from 22 per cent in 2020. BTL loans made up 13 per cent of total balance, slightly lower than 14 per cent in 2020.
The average owner-occupied loan to value (LTV) stayed roughly stable at around 50 per cent, whilst for BTL loans it decreased slightly from 55 per cent to 53 per cent.
Barclays UK said it had served around 150,000 customers with a mortgage, of which 48,000 were first-time buyers. This is up from 25,000 in 2020.
The average LTV of its mortgage portfolio was 51 per cent, which is the same level it has been since 2019. However, the average LTV of new mortgage lending was 70 per cent, which is slightly up on 68 per cent in both 2019 and 2020.
The lender reported a profit before tax of £2.47bn in 2021, which is up from £546m in 2020. This is also an increase from around £1.02bn in 2019.
The provider reported a total income for 2021 of £6.5bn, which is an increase of around three per cent from the prior year. It attributed this to “robust mortgage lending” as well as balance growth in deposits and non-recurrence of Covid-19 customer support actions.
The number of branches has fallen to 666 from 859 in 2020 and 963 in 2019. The number of full-time employees has also fallen from 21,300 in 2020 to 7,100 in 2021.
The report added that Tushar Morzaria will step down as finance director, with Anna Cross due to take over as an internal successor.
Green mortgages
Barclays said it had completed around £1bn in green mortgages since it entered the space in 2018, with £520m of those completions occurring in 2021.
It added that in January this year, it had expanded the eligibility to include customers purchasing a new-build energy efficient buy-to-let property.
Overall, it said that there were 4,434 green mortgage completions, and 2,330 of these were conducted in 2021.
The lender added that as of the end of Q3 2020 a valid energy performance certificate was available on 62 per cent of its mortgage book by value and 38 per cent had an EPC of C or higher.
Former boss pay freeze
Barclays also confirmed it would freeze former CEO Jes Staley’s bonus after he stepped down from his role in 2021 amid a regulatory investigation into his relationship with the late Jeffrey Epstein.
A separate statement from Barclays board said: “In line with its normal procedures, the Committee exercised its discretion to suspend the vesting of all of Mr Staley’s unvested awards, pending further developments in respect of the regulatory and legal proceedings related to the ongoing FCA and PRA investigation regarding Mr Staley. No further remuneration decisions have been made in respect of Mr Staley.”
Makwana was most recently a key account manager for buy-to-let (BTL) at West One Loans for just over a year, and before that was a business development manager at Together for nearly four years.
Prior to that he worked for 13 years at Barclays within its mortgage and financial planning divisions in various roles.
In his role at Gatehouse he will focus on key mortgage networks and clubs in the south of the UK and will report to Lottie Clayton, head of intermediary sales.
Clayton (pictured) said: “I am delighted to welcome Kitt to our rapidly growing team. He has invaluable knowledge and experience of the specialist finance market and, with the existing relationships he holds with mortgage networks and clubs, I’m confident Kitt can help to further increase the number of brokers, introducers and networks we work with.”
Makwana added: “This is a great time to join the business. The bank continues to expand its range of products and I’m looking forward to seeing our proposition grow further across the UK’s intermediary market.”
In recent months the lender has lowered its minimum finance amount it will offer BTL and home purchase plan borrowers and increased the maximum loan amount for such borrowers.
According to a report from Sky News, Barclays and Starling Bank are bidding for the specialist lender’s platform, whilst M&G and Pimco are competing for its mortgage assets. The auction is reportedly being managed by Morgan Stanley.
Kensington was reported to have been put up for sale in November last year, having been purchased by funds managed by Blackstone and TPG in 2015.
It has most recently partnered with Proportunity to offer a combined loan and has teamed up with Rothesay for a long-term fixed rate mortgage.
Last year it also launched a credit recovery range and re-entered the 95 per cent loan to value space.
According to its website, the lender is one of largest issuers of residential mortgage-backed securities, having sponsored 21 securitisations totalling over £11.5bn since 2015.
In 2021 alone it placed a £425m mortgage bond, upsized its Finsbury Square green securitisation to £750m and completed a £473m eco-friendly securitisation.
Kensington, Starling, Barclays, M&G and Morgan Stanley and Pimco declined to comment.
The products are available for new-build purchases that have an energy efficiency rating of 81 or above, or are in energy performance certificate (EPC) bands A or B.
It includes a two-year fixed rate at 1.64 per cent at 75 per cent loan to value (LTV), and a five-year fix at the same tier with a rate of 1.87 per cent. Both come with a £1,295 fee.
The product offers a 10-basis point discount for customers, meaning they can save up to £1,250 on a BTL mortgage of £250,000 over the five-year fixed term, or £500 on a £250,000 two-year fixed mortgage.
Lee Chiswell, head of Barclays mortgages, said: “Barclays was the first major UK lender to launch a green home mortgage in 2018, and we are pleased to be launching our green home buy-to-let mortgages, offering rate discounts to customers who are looking to purchase an energy efficient new build home to let, and rewarding them for making greener choices.
“We will continue to explore pioneering green products that meet the demands of our customers, to help them navigate the transition to a low-carbon economy and to encourage innovation in the lending sector.”
Since it launched its green home mortgage, Barclays has helped 4,000 customers to purchase a property with an A or B EPC rating by offering them a lower interest rate.
Skipton BS ups BTL max loan limit
Skipton Building Society has increased the maximum loan amount for BTL loans from £1m to £1.5m.
The mutual said the increase will allow brokers to help more clients and the change comes into effect from 17 January.
Barclays also found that 28 per cent of people don’t know what the standard variable rate (SVR) is, and that 45 per cent aren’t clued up on what loan to value (LTV) means.
This has resulted in homeowners relying on others for help and guidance on remortgaging, with 46 per cent of people doing whatever their mortgage broker tells them, rather than fully understanding the terminology.
A spokesperson for Barclays Mortgages said: “It’s clear from our research that many find remortgaging a tricky subject to understand, even though UK adults have been on the mortgage payment ladder for an average of 13 years and five months. As a result, homeowners are sticking with what they know and potentially missing out on lower monthly payments.
“With the average amount left to pay on a mortgage at 45 per cent, and the best deals often found at lower LTVs, remortgaging sooner could end up saving them money – not only month to month, but over the whole term of their mortgage.”
Barclays also said those who do remortgage most commonly switch to a fixed rate deal with 93 per cent of customers who remortgaged in the first half of 2021 opting to lock in their rate for a fixed term.
Two-year and five-year fixed terms were revealed to be the most popular term lengths as 88 per cent of homeowners who remortgaged during this time chose to fix their payments for either two or five years, with 44 per cent choosing a two-year fixed term and 44 per cent choosing a five-year fixed term.
According to Barclays two-year fixed term deals were most popular with the under 30s, as 57 per cent of this age group opted for a shorter term fixed rate period of two years. By contrast, homeowners aged 40-56 were most likely to chose to commit to longer term five-year fixed rate deals, with 47 per cent locking in their monthly payment for this period.
