Barclays shows momentum, but misconduct bites

LONDON • Barclays plc is finally showing some momentum for Jes Staley, whose beefed-up investment bank tracked Wall Street’s surge in equities revenue.

The British bank beat trading expectations for a second straight quarter, driven by a 28% jump in revenue from dealing stocks, matching the performance of US rivals after a volatile start to the year boosted client activity. The results were blemished by another £2 billion (RM10.96 billion) of misconduct charges, a reminder of the firm’s involvement in past scandals that it has promised to stamp out.

Staley has been under fire over persistently low returns at the investment bank, the centrepiece of his turnaround strategy. The trading results may strengthen the CEO’s hand against Edward Bramson, who has yet to outline his demands after emerging as one of Barclays’ largest share- holders in March. Executives have a meeting scheduled soon with Bramson soon and look forward to a “robust conversation” with the high-profile activist, Staley said in a Bloomberg Television interview.

The stock fell 2.2% to £2.08 at 8:13am yesterday in London, cutting 2018’s gain to about 2%.

While the US$2 billion US penalty imposed to resolve a probe into the sale of pre-crisis toxic mortgage bonds was expected, Barclays surprised the market with an extra £400 million charge for the payment-protection insurance scandal, adding to more than £9 billion it has already set aside to compensate customers.

When misconduct charges are included, the bank swung to a £236 million loss in the quarter and its common equity Tier 1 ratio, a key measure of financial strength, fell to 12.7% from 13.3%.

The results “underline” the success of the current strategy and the investment bank “clearly gained market share”, Staley, who is in his third year as CEO, said in the interview. He reiterated a promise to return an increasing amount of cash to shareholders through dividends and buybacks.

When converted to dollars, the CEO said revenue from trading rose 21%, more than double the average of the US investment banks and “quite a bit more than what the European banks saw”. He credited investment in technology, and said the bank wasn’t taking on more risk to boost returns.

Overall trading revenue at the investment bank rose 8% to £1.46 billion in the first three months of the year, compared to the 2% average drop forecast by three analysts surveyed by Bloomberg News.

The good performance in equities — which was similar to the 32% surge seen on Wall Street — was offset by a 2% fall in fixed-income and currency trading, which was exacerbated by a decline in the value of the dollar against the pound.

Barclays’ overall pretax profit, excluding litigation costs, rose 1% to £1.7 billion in the first three months of the year, beating the average £1.6 billion average estimate of 12 analysts compiled by the bank. Net operating income fell 4% to £5.1 billion. — Bloomberg