Barclays Investment Bank Profit Rises 12% on Advisory Income

Updated on
  • `Weaker conditions' for unit in October versus year earlier
  • Equities income rebounds from dark pool probe impact last year
Photographer: Chris Ratcliffe/Bloomberg

Barclays Plc, the second-biggest U.K. lender, said third-quarter profit at its investment bank rose 12 percent as income from advising companies on deals and managing bond sales increased.

Pretax profit rose to 317 million pounds ($483.7 million) from 284 million pounds a year ago, the London-based bank said in a statement Thursday. Investment-banking fees climbed 22 percent and equities income gained 12 percent, while operating expenses were little changed at about 1.3 billion pounds.

Barclays warned the unit, run by Tom King, suffered from “weaker market conditions” this month. Incoming Chief Executive Officer Jes Staley pledged a day earlier to continue shrinking the division to a “less capital-intensive model” and improving relations with regulators. The securities arm contributes about a third of the bank’s revenue, yet has the lowest profitability of four units, with a 2.7 percent return on equity in 2014.

“October will be weaker than in previous years, but it’s hard to project from one month how the full quarter will look,” Finance Director Tushar Morzaria said on a conference call with journalists. At the investment bank, “we are quite pleased with performance in the third quarter. Rates and currencies trading and debt underwriting performed well.”

The Barclays results compare those of Deutsche Bank AG, which said earlier Thursday that equity trading revenue fell 19 percent to 588 million euros ($421 million). The five biggest U.S. investment banks saw their combined trading revenue decline 8.3 percent to $16.9 billion in the third quarter from a year earlier, data compiled by Bloomberg show.

Barclays’s equities income still missed the 33 percent rebound forecast by Chirantan Barua, an analyst at Sanford C. Bernstein in London. The division’s income was depressed a year earlier by an investigation into the bank’s “dark pool” trading venue, with New York’s attorney general accusing Barclays of lying to customers and masking the role of high-frequency traders. Barclays has said it did nothing wrong and is contesting the complaint.

Revenue from so-called FICC trading, which includes bonds as well as securities tied to interest rates and currencies, slipped 1.7 percent to 713 million pounds. Barua, who has a market perform rating on the shares, had estimated a 10 percent slump.

Barclays appointed Staley, the former head of JPMorgan Chase & Co.’s investment bank, as its new chief executive officer on Wednesday. Since removing previous CEO Antony Jenkins, who had clashed with King, Chairman John McFarlane has pledged to focus on the U.K. and U.S., characterizing Barclays as a “trans-Atlantic bank,” and boost the equity capital markets units and advisory arm.