Barclays Investment Bank Profit Rises 37% on Cost Cuts, Advisory

Barclays CEO Antony Jenkins
Antony Jenkins, Chief Executive Officer of Barclays Plc. Photographer: Simon Dawson/Bloomberg

Barclays Plc’s investment bank posted a 37 percent profit increase in the first quarter as Chief Executive Officer Antony Jenkins’s cost cuts outweighed stagnant income from trading.

The division’s pretax profit was 675 million pounds ($1 billion), compared with 491 million pounds in the year-earlier quarter, London-based Barclays said in a statement Wednesday. Investment bank revenue rose 2 percent to 2.15 billion pounds.

Jenkins has set up a bad bank to offload assets, shrunk the fixed-income unit and pledged to cut 7,000 jobs in order to revive earnings and profitability. The investment bank, run by Tom King, remains less profitable than the Barclaycard and personal and corporate banking divisions.

The investment bank’s profit growth “is more indicative of the potential of the franchise following the repositioning undertaken last year,” Jenkins said in the statement.

Expenses incurred by the Transform cost-cutting program were 31 million pounds in the quarter, down from 130 million pounds in the same period a year earlier. Total operating expenses, including Transform, fell 8.6 percent to 1.49 billion pounds.

“Income growth is anemic,” Chirantan Barua, an analyst at Sanford C. Bernstein in London, said of the investment bank in an e-mail before the results were released. “The one area they know they can solve for is cost.”

Return on equity for the division was 9.1 percent, compared with 6.1 percent a year earlier.

Fees from arranging mergers and securities sales rose 7 percent to 549 million pounds. Credit-trading income dropped 21 percent.

Dark Pool

Equities revenue rose 4.7 percent to 619 million pounds. That trailed the performance of some U.S. competitors in the quarter, paced by Goldman Sachs Group Inc.’s 46 percent equities gain.

Barclays has been hurt by an investigation into its dark pool, a private equity-trading venue. New York’s attorney general filed a lawsuit in June accusing Barclays’s electronic-trading division of lying to customers and masking the role of high-frequency traders in its dark pool. Barclays has said it did nothing wrong and is contesting the complaint.

The investigation severely dented the equities business, Barua said.

“The Barclays equities business is the old Lehman business, a late starter into equities but one that was built in the U.S. around best-in-class dark pools technology,” Barua said. “It will require a significant slog uphill for Barclays to be compared anywhere near to Goldman or Morgan Stanley.”

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