(Bloomberg) -- Barclays Plc warned of challenges to its capital strength and souring loans at its consumer and corporate businesses as British lenders gear up to battle deteriorating economic conditions.
The U.K.'s third-largest bank by market value said its earnings later this month will “reflect the challenging income and impairment conditions for the consumer and corporate businesses, and continuing strength of markets income.”
Barclays said Monday it's likely to report a rise in CET1, a measure of the capital strength, to 14% for the end of June, from 13.1% in the first three months of the year, before “headwinds” affect the ratio in the second half.
“Any good news on Barclays capital is always welcome given that this is a perennial area of disappointment,” said Edward Firth, analyst at Keefe Bruyette & Woods. The bank's shares rose as much as 3.1% in London.
British banks face unprecedented challenges as the lockdown imposed to curb the spread of the coronavirus pushes many companies toward collapse, forcing lenders to make provisions to cover likely losses. Barclays already booked a 2.1 billion-pound ($2.7 billion) charge in April, its biggest quarterly provision in a decade. New accounting standards are also complicating banks' efforts to anticipate how businesses and consumers will be affected. Regulators, meanwhile, have relaxed some capital requirements and asked banks to halt dividends to ensure lending continues.
Read more about Covid-19 turmoil in Britain's shopping and dining districts
Chief Executive Officer Jes Staley said last month that while spending has started to recover, a spike in unemployment could prompt a second economic storm.
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