investment bank hits profits again
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[May 06, 2014] By
Steve Slater and Matt Scuffham
(Reuters)-— Barclays <BARC.L>
said a collapse in investment bank revenue hit first quarter profits
and was still hurting income in April as the British bank works on
an overhaul of the flagging business, expected to be announced later
Income from its investment bank fell 28 percent, largely because of
a 41 percent drop in fixed income, currencies and commodities (FICC).
FICC is hurting most banks since regulators have forced them to set
aside large amounts of money to cover losses from risky trading, but
Barclays' performance was far weaker than its rivals - which on
average have seen a 12 percent profit fall - because of its heavy
reliance on FICC and particularly rates trading, hit by low interest
Barclays said it would give details of its strategic overhaul on
Thursday, adding that the first steps to realign its business had
also affected first quarter income.
Barclays shares dropped 3.7 percent by 04:40 am EDT (0840 GMT),
reflecting investors' concerns that the bank has a lot to do, and
that its reorganization looks tardy compared to rivals such as UBS <UBSN.VX>
which has already overhauled its business to focus on its private
bank to bolster earnings.
The Swiss bank said on Tuesday it would further revamp its corporate
structure to ensure it can be broken up more easily in a crisis,
cutting the amount of money it must set aside for potential losses
and allowing it to pay shareholders a special dividend.
"There are significant uncertainties not only with the final version
of the strategy but market factors as well," said Chirantan Barua,
analyst at Sanford.
Barclays Chief Executive Antony Jenkins wants to pull back from
activities that use a lot of capital - which is expected to include
European FICC and emerging markets units - to boost returns in the
face of the tougher regulations and still sluggish markets.
Barclays has also decided to quit commodities trading, although
finance director Tushar Morzaria declined to specify any other
changes ahead of the review details.
The weak results add to ongoing concern at the bank that Jenkins
faces a tough task in both taking a harder line on costs and
preventing an exodus of U.S. staff. The bank raised 2013 bonuses
despite a fall in profits in order to hold on to U.S. investment
bank staff, prompting a backlash from shareholders.
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LOWEST COSTS SINCE 2009
The investment bank's weakness offset higher income in other parts
of the bank and dragged adjusted profit before tax in the three
months to the end of March down 5 percent from a year ago to 1.69
billion pounds ($2.85 billion).
Barclays said it had cut its costs, which had been a concern among
Operating expenses, excluding its restructuring costs, fell 12
percent from a year ago to 4.2 billion pounds, which it said was the
lowest quarterly costs for five years.
Profits rose in UK retail banking, credit card arm Barclaycard and
Barclays did not set aside any extra money to compensate customers
for mis-sold loan insurance, but said seen "a significant spike" in
complaints in March from claims management companies, mostly related
to insurance sold more than a decade ago.
(Editing by Sophie Walker)
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