Barclays has reported a 30% drop in pre-tax profits as its provision for bad loans due to the pandemic hit £4.8bn.
However, the drop to £3.1bn in 2020 was much less than forecast as a strong performance by its investment bank offset cash set aside to cope with losses caused by the economic fallout of COVID-19.
Despite the profits hit, the banking giant said it would resume paying dividends after lenders halted payouts last year at the request of the Bank of England.
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This raises expectations other UK lenders will follow suit when they report full year earnings in the next few days.
Barclays also unveiled a £1.6bn bonus pool for staff and £1.4m in annual bonuses and incentive shares for chief executive Jes Staley.
The bank’s posted profit was well above the average estimate of £1.96bn from analysts’ forecasts compiled by the bank.
The results also revealed another £492m had been earmarked to cover expected borrower defaults due to the coronavirus crisis in the final three months of the year, although this was down nearly a fifth on the previous quarter.
The lender warned costs related to the pandemic will remain high throughout 2021, but that it expects loan loss charges to be “materially below” the £4.8bn hit.
However, Barclays said its investment arm had offset the impact on its retail business, with its “best ever year” for markets and banking income helping keep the group in profit every quarter.
Mr Staley said: “Given the strength of our business, we have decided the time is right to resume capital distributions.
“We have today announced a total payout equivalent to 5p per share, comprising a 1p 2020 full year dividend and the intention to initiate a share buyback of up to £700m.”
He added: “We expect that our resilient and diversified business model will deliver a meaningful improvement in returns in 2021.”
In its annual report published alongside the results, Barclays revealed the staff bonus pool was 6% higher than the £1.5bn shared out in 2019.
It said this represented a “relatively modest increase across the investment banking businesses, reductions for all other businesses and appropriate recognition for the contributions of our more junior colleagues”.
Mr Staley’s annual bonus awards took his total pay to £4.01m for 2020, though this was down on the £5.9m paid out in 2019.
Dividends and bonuses will come under the spotlight this year’s bank results season, with handouts set to fuel controversy against the backdrop of economic turmoil caused by the pandemic.
The Prudential Regulation Authority (PRA) recently gave the go-ahead for lenders to resume shareholder payouts.
Mr Staley said despite the mammoth loan losses that impacted figures, “2020 demonstrated the value of our diversified banking model”.
Stock market volatility since the start of the pandemic helped drive a 45% surge in revenues to £7.6bn for its markets unit, which trades fixed-income securities, equities and derivatives.
But its consumer, cards and payments division slumped to a £388m loss in 2020 due to the loan losses and wider economic troubles.