Bar­clays prof­its fall in Q2 as in­vest­ment in­come sags

Viet Nam News - - World Business -

LON­DON -— Bar­clays Plc said its un­der­ly­ing prof­its fell 8 per cent in the sec­ond quar­ter as the Bri­tish bank’s at­tempts to crack down on high-risk trad­ing and sub­dued mar­ket ac­tiv­ity took a toll on in­vest­ment bank­ing rev­enue.

Bar­clays said it had made good progress in cut­ting costs and hiv­ing off as­sets it no longer wants. It has cut 5,000 jobs this year, leav­ing it with fewer staff than at any time since 2007.

Its shares were up 3.2 per cent at 226.2 pence by 0745 GMT (3:45 a.m. EDT), the top per­form­ing Euro­pean bank stock. Some an­a­lysts said the drop in in­vest­ment bank­ing rev­enue was less se­vere than they ex­pected.

Chief Ex­ec­u­tive Antony Jenk­ins has pledged to make Bar­clays leaner and more prof­itable and stamp out wrong­do­ing, but his turn­around ef­forts are be­ing dogged by prob­lems from the past and the weak in­vest­ment bank rev­enues.

Bar­clays said the US De­part­ment of Jus­tice had re­quested an ex­ten­sion to a non- prose­cu­tion agree­ment (NPA) that was due to ex­pire last month, to al­low it to con­tinue to in­ves­ti­gate pos­si­ble mis­con­duct in for­eign ex­change trad­ing. The NPA was put in place af­ter the bank was fined $ 450 mil­lion for the al­leged rig­ging of Li­bor in­ter­est rates, and means if the DOJ finds any wrong- do­ing in FX ac­tiv­i­ties it could come down harder on the bank.

The bank also set aside a fur­ther 900 mil­lion pounds to com­pen­sate cus­tomers mis-sold loan in­sur­ance, tak­ing its to­tal bill for the scandal to 4.85 bil­lion.

Bar­clays said ad­justed prof­its in the three months to the end of June fell to 1.7 bil­lion pounds ($2.9 bil­lion) from 1.8 bil­lion a year ago. First-half earn­ings were 3.3 bil­lion, down 7 per cent on the year but above the av­er­age fore­cast of 3 bil­lion from an­a­lysts polled by the com­pany, as op­er­at­ing costs fell.

An­a­lysts said the bank had beaten ex­pec­ta­tions on its cost cut­ting and on losses from bad debts, and re­ported a stronger-than-ex­pected lever­age ra­tio of 3.4 per cent, up from 3 per cent at the start of the year.

Citi an­a­lyst An­drew Coombs said he ex­pected to see “low sin­gle-digit” earn­ings up­grades fol­low­ing the re­sults.

“We ex­pect re­cent neg­a­tive earn­ings mo­men­tum to re­verse in the sec­ond half, which could al­low the shares to grind higher, de­spite on­go­ing lit­i­ga­tion con­cerns,” he said.

Fixed-in­come de­cline

Bar­clays, which last year raised 5.8 bil­lion pounds to bol­ster its cap­i­tal and meet tougher reg­u­la­tory de­mands, said its core tier-one cap­i­tal ra­tio had risen to 9.9 per cent at the end of June com­pared with 9.1 per cent at the end of 2013.

The bank’s shares are down about 20 per cent this year, the third worst per­former among Europe’s top 47 banks.SX7P, which are on av­er­age up 1 per cent. Bar­clays shares trade at 0.6 times book value, well below the av­er­age of 1 times for its Euro­pean peers, ac­cord­ing to Reuters data.

Its val­u­a­tion is be­ing de­pressed by the threat of more lit­i­ga­tion costs, weak re­turns and its still hefty re­liance on the in­vest­ment bank, which is seen as more volatile than re­tail and cor­po­rate bank­ing.

Rev­enues fell 16 per cent at the in­vest­ment bank, where busi­ness has been hit by a de­cline in fixed-in­come trad­ing and tougher reg­u­la­tion.

Rev­enue from credit and macro prod­ucts in the sec­ond quar­ter was down 17 per cent, a steeper drop than at US ri­vals which saw a fall of 9 per cent on av­er­age.

That was due partly due to a strong Bri­tish pound, and an­a­lysts said the in­vest­ment bank’s over­all per­for­mance was in line with ex­pec­ta­tions, or slightly bet­ter. Ad­vi­sory rev­enues jumped 35 per cent, out­per­form­ing Bar­clays’ com­peti­tors.

Jenk­ins is cut­ting 7,000 jobs in the in­vest­ment bank as part of 19,000 job cuts across Bar­clays in the next three years. —

Newspapers in English

Newspapers from Viet Nam

© PressReader. All rights reserved.