Barclays Investment Bank Slips Into Quarterly Loss Amid Overhaulby and
Unit's cost-to-income ratio for fourth quarter was 109%
Does not expect a `strong' performance in first quarter 2016
Barclays Plc’s investment bank swung to its first quarterly loss in at least two years, hurt by a drop in equities revenue, as Chief Executive Officer Jes Staley shrinks the securities unit.
The investment bank posted a loss of 146 million pounds ($204 million) in the fourth quarter compared with a pretax profit of 35 million pounds in the year-earlier period, the London-based bank said in a statement on Tuesday. The unit’s cost to income ratio, a measure of efficiency, soared to 109 percent from 97 percent.
“In light of current market conditions, and on the back of a particularly strong March in 2015, we do not expect as strong a performance for the whole of quarter one this year,” Finance Director Tushar Morzaria said in the statement. Revenue in January and February was “broadly in line” with last year’s performance at the unit, the bank said.
European lenders have struggled to overhaul their securities divisions after volatile debt and equity markets eroded revenue and regulators toughened scrutiny of riskier activities. Since taking over in December, Staley has unleashed a fresh round of cuts at the investment bank, eliminating thousands of jobs and shutting operations across Asia to focus on the most profitable businesses in the U.S. and the U.K.
Deutsche Bank AG, which laid out a plan in October to shut operations in 10 countries and cut the number of investment-banking clients, has lost about 30 percent of its market value this year while seeking to calm fears about its ability to service debt. Credit Suisse Group AG accelerated staff reductions after trading losses sparked a weaker-than-expected fourth-quarter performance.
Barclays said earlier this month that Tom King, head of the investment bank, will retire on March 4. Staley told journalists on a call on Tuesday that the securities unit will report to him until a successor is found, with the lender relying on King’s management team “for right now.”
At Barclays, the investment bank’s operating expenses slipped 2.2 percent to 1.6 billion pounds in the fourth quarter from a year earlier, while revenue dropped 13 percent to 1.4 billion pounds. Litigation and conduct related costs fell to 6 million pounds from 33 million pounds. The return on average tangible equity was a negative 3.9 percent.
Income from all businesses fell in the quarter, with the exception of credit products rising 28 percent to 221 million pounds. Investment banking income, which includes fees earned from advising on mergers and acquisitions fell 13 percent to 456 million pounds, while income from its markets arm, which includes equities, credit and macro products slipped 11 percent to 917 million pounds.