Tuesday 17 September 2019

Barclays trading boost not enough to ease profit fears

Cost cuts: Barclays CEO Jes Staley has vowed to reduce expenses and pay to help get it back on track
Cost cuts: Barclays CEO Jes Staley has vowed to reduce expenses and pay to help get it back on track

Stefania Spezzati

Barclays traders outperformed their rivals in the first quarter, but that wasn't enough to ease concern over Jes Staley's plan to make his investment bank more profitable and fend off an activist investor.

First-quarter income at the London-based firm's markets unit fell less than expected and revenue from fixed income, currencies and commodities rose 4pc, making Barclays one of the few major banks to post a gain.

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However, the bank's total revenue and its common equity Tier 1 ratio, a measure of capital strength, both missed analysts' estimates, as did the British retail bank's performance.

The American-born CEO vowed to reduce expenses and cut bankers' pay if tough conditions persist through the rest of the year.

Mr Staley had previously said the securities unit wasn't yet performing as hoped, and at the end of the quarter, it was rocked by the abrupt departure of Tim Throsby - one of Mr Staley's key hires.

"If revenues continue to be light, we'll make the proper adjustments to compensation and costs overall so we can manage to the profitability levels that we've committed to our shareholders," Mr Staley said in a Bloomberg Television interview.

The shares fell 1.7pc at 10.15am in London. Mr Staley's strategy has come under the intense scrutiny of Edward Bramson, a critic of his investment-banking strategy, who is seeking a board seat at next week's AGM.

"We wanted to bring into the executive committee of the bank more direct contact with those running the corporate and investment bank," Mr Staley said when asked about the reorganisation that saw Mr Throsby depart.

Mr Staley has committed to a return on tangible equity target above 9pc in 2019. For the first quarter, it was 9.6pc at group level, excluding conduct and litigation effects.

However, cost cuts may not be enough if business doesn't pick up as well, analysts at Citigroup said. "We still struggle to see how Barclays can achieve" that target "without stronger top-line growth," they wrote in a note to clients, reiterating their sell rating.

Barclays has increased the size of its staff bonus pool by 9pc versus 2017, the first increase in five years, with investment bank compensation tracking that gain under Mr Throsby's leadership. The corporate and investment bank posted a return on tangible equity of 9.5pc in the first quarter - the Barclays unit with the lowest return.


Irish Independent

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