Barclays' investment bank profits halve
Tuesday 06 May 2014
Barclays chief executive Antony Jenkins is set to announce sweeping changes after profits at its investment bank division halved.
Barclays has cut 450 managing director or director jobs in the investment banks this year and more are expected to go as Jenkins reveals plans to quit swathes of the business on Thursday.
Fixed income, currencies and commodities took the brunt of the damage in the first quarter as Barclays lost ground to rivals and overall trading volumes were lower.
The bank has already cut back in several areas including commodities.
Finance director Tushar Morzaria admitted the bank had lost investment bankers, particularly in New York where it took over Lehman Brothers at the height of the financial crisis in 2008.
He said: “The review may or may not have prompted people to move on. It may also have affected trade, which was worse than some of our rivals in some areas.”
Last week the chief executive of Barclays America, Skip McGee, quit and there are reports that the head of mergers and acquisitions Paul Parker is set to leave.
Analysts said the investment bank’s figures were even worse than expected with FICC income down 48 per cent. Barclays shares fell 10.4p, or 4 per cent, to 248.1p.
Morzaria pointed out that the areas of investment banking the group plans to concentrate on — advisory and equities — had a good quarter with income broadly flat. But he said in FICC the poor trading of the first quarter had continued through April.
The bank said: “We continue to be cautious about the trading environment in which we operate and as a consequence we remain focused on structurally reducing the cost base in order to improve returns.”
Barclays’ pre-tax profits fell 5 per cent to £1.7 billion in the three months to end March with all divisions except the investment bank showing growth. Retail banking profits were up 20 per cent, Africa up 25 per cent, Barclaycard 17 per cent and corporate banking up 42 per cent.
Only the European retail banking arm, which is widely expected to be sold off or closed, continued to lose money.
Jenkins said of Thursday’s strategy update: “This plan will address issues underlying the performance challenges we have recently experienced, including positioning the investment bank for the new operating and regulatory environment.”
James Chappell, analyst at Berenberg, said he would like to see Barclays “lay out a path to separate the investment bank, but doubt whether management will go as far”.
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