Barclays’ investment bank sees its profits slashed by half

The scale of Barclays’ problems in its investment bank were laid bare after it revealed the division’s profits had halved, just two days before its chief executive Antony Jenkins announces sweeping changes.

Barclays has cut 450 managing director or director jobs in the investment bank this year and more are expected to go as Mr Jenkins reveals plans to quit swathes of the business on Thursday.

The bank also cut total compensation in the unit by 20 per cent, to £1.1bn, after widespread anger about its decision to increase bonus payments in 2013 as profits fell.

Barclays’ pre-tax profits fell 5 per cent to £1.7bn in the three months to end March, with all divisions except the investment bank showing growth.

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.

The 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.

Mr 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 the fixed income, currencies and commodities business, 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.”

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.

Barclays said that its operating expenses, excluding restructuring costs, were down 12 per cent compared with a year ago, at £4.2bn. At the investment bank, costs fell by 14 per cent.

Mr Jenkins said of tomorrow’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, a banking 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”.

Shares in Barclays fell 5 per cent to 245p.