Barclays shares up even as group reports 25% profit fall

Barclays says revenue at its investment bank fell less than expected in turbulent markets, and it avoided any new misconduct charges.
Barclays says revenue at its investment bank fell less than expected in turbulent markets, and it avoided any new misconduct charges.PHOTO: REUTERS

LONDON • Barclays yesterday said revenue at its investment bank fell less than expected in turbulent markets, and it avoided any new misconduct charges, helping investors overlook a larger loss from selling unwanted assets.

Pre-tax profit fell 25 per cent to £793 million (S$1.6 billion) from £1.06 billion a year ago, the bank said. Revenue dropped 13 per cent to £4.6 billion, topping the £4.48 billion average estimate of nine estimates provided by the company.

The shares climbed to their highest in almost three months as the firm's investment bank posted smaller revenue falls than rivals in the United States. CEO Jes Staley, who has resisted calls to shrink or spin off the unit, said he was encouraged by "significant" market share gains in that business.

"The market is likely to take comfort from the income beat, given that this has been a historical source of disappointment for the group and considering concerns around weakness in investment banking performance coming into the results," said Mr Gary Greenwood, an analyst at Shore Capital with a "buy" on Barclays shares.

The shares rose 2.5 per cent in early morning trade, paring this year's loss to 19 per cent and climbing to their highest since Feb 2.

The results will bolster Mr Staley's chances of convincing investors of the long-term benefits of maintaining an investment bank, even after it generated lower returns than Barclays' consumer and credit-card businesses. The CEO has opted to cut the dividend for two years and sell down the bank's stake in its Africa business to boost capital.

Revenue from the firm's markets business dropped 4 per cent, as a jump in credit trading offset declines in equity- and macro-trading units. Investment banking fees fell 12 per cent, and the firm said income in April has fallen from the first quarter.

Barclays said underlying pre-tax profit at the corporate and investment bank was £701 million, a 31 per cent fall, excluding some one- time charges for legal and regulatory matters. Barclays had warned the first quarter would see lower revenue from the investment bank after a weak showing in March.

The results will bolster Mr Staley's chances of convincing investors of the long-term benefits of maintaining an investment bank, even after it generated lower returns than Barclays' consumer and credit-card businesses. The CEO has opted to cut the dividend for two years and sell down the bank's stake in its Africa business to boost capital.

The bank had no notable provisions for investigations or customer redress, after almost £1 billion of such charges in the year-earlier quarter, and its cost-cutting programme remains on track. "The results appear uncharacteristically clean," said Mr Ian Gordon, an analyst at Investec with a "buy" rating on the stock. "There are no separately disclosed below the line conduct charges at all."

Mr Staley has asked investors to endure short-term pain so he can boost returns by exiting some operations.

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A version of this article appeared in the print edition of The Straits Times on April 28, 2016, with the headline 'Barclays shares up even as group reports 25% profit fall'. Print Edition | Subscribe