Barclays Drops After Warning of Hit From Structured Notes Gaffe

By Geoffrey Smith

Investing.com -- Barclays (LON:BARC) shares fell 3.7% by mid-morning in London on Monday after the U.K. bank warned it would take a hit to earnings due to having issued too many structured notes.

The bank said it expects a net charge against earnings of 450 million pounds ($590 million), and a drop of nearly 30 basis points in its core tier 1 capital ratio, a measure of financial strength closely tracked by regulators and investors.

Barclays also said it would delay the launch of its 1 billion pound share buyback as a result. It had announced that plan on February 23rd.

Structured notes are complex debt products that banks often tailor to meet the specific needs of certain fixed-income clients. Because of their complexity, regulators, buyers and the banks' risk management departments all have an incentive to keep the amount of such debt under firm limits.

In 2019, Barclays had tried to limit its issuance to $5 billion, but ended up registering $20.8 billion in maximum aggregate offering terms as of August 2019.

A statement by Barclays didn't explain how the error had happened, nor why it has taken nearly three years to uncover it.

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