Barclays Shares Slump as Debt Trading and Expenses Disappoint

Barclays Plc fell the most among European banks on Friday after the bank’s debt trading revenue and expense forecast disappointed investors.

Revenue from fixed income, currency and commodities trading slumped 35% in a quarter that saw U.S. rivals post double-digit growth. Shares fell as much as 7.5% as the bank missed its target on a key expense ratio and warned costs will rise this year above 2020 levels.

“The old problem of Barclays cost profligacy has clearly returned,” said Edward Firth, an analyst at Keefe, Bruyette & Woods.

While the firm posted a 65% jump in equity trading and record investment banking fees, the debt trading slump meant corporate and investment bank income was broadly flat.

“A mixed result,” Chief Executive Officer Jes Staley said of the investment bank’s performance in a Bloomberg Television interview Friday. “In our FICC business we were slightly off a very strong first quarter last year.”

It follows a recent hot streak on Wall Street and at some European peers, who were boosted in the first quarter by securities trading, special purpose acquisition companies and tech-company stock offerings. French rival BNP Paribas SA also reported Friday, revealing it too missed out on the global fixed-income rally.

“We thought the outperformance in corporate and investment bank relative to consensus could have been stronger following the U.S. banks,” said John Cronin, an analyst at Goodbody.

Shares in Barclays were down 6.2% at 12:46 p.m. in London trading. The stock is still up 21% since the start of the year.

Barclays Shares Slump as Debt Trading and Expenses Disappoint

Staley said the cost increase in the quarter was linked to compensating investment bank staff for their performance. “It’s a very controllable number so if our performance weakens we can take it right down again,” he said.

A review of the bank’s real estate needs as more staff work from home is due within months and could lead to onetime charges in future, finance director Tushar Morzaria told reporters.

More Provisions

Barclays also took a further 55 million-pound charge for doubtful loans, departing from British rivals including Lloyds Banking Group Plc and NatWest Group Plc who released provisions this week, but said impairment charges this year will be “materially below” 2020 as the pandemic starts to abate. “We are trying to be prudent,” said Morzaria.

Staley said the bank could release some provisions later in the year “if the economy continues in the current path.”

Barclays Shares Slump as Debt Trading and Expenses Disappoint

However, the firm cautioned of “headwinds” persisting at Barclays UK, where income fell 8% in the first quarter. While Covid-19 cases in the U.K. are at the lowest level in months and half the population are at least partly vaccinated, officials have raised concerns that new variants might evade vaccines and jeopardize the return to normal life.

“There is a lot of cautious commentary on the update in relation to the demand for unsecured lending, driving an uncertain income outlook,” according to Cronin.

Staley has grown the corporate and investment bank as a hedge during times of economic crisis. He promoted C.S. Venkatakrishnan and Paul Compton last year to further develop the division and has reaped rewards from the past year of pandemic-driven volatility and a rush of companies tapping wide-open capital markets.

Other highlights:

  • Corporate and investment bank total income broadly flat at 3.6 billion pounds
  • Group pretax profit 2.40 billion pounds, up from 913 million pounds a year ago
  • Consumer, cards and payments income was down 22%. “It will take time to get to pre-pandemic levels in credit cards,” said Staley.
  • Barclays isn’t exposed to the Archegos Capital Management LP meltdown. “We are fortunate and avoided issues. Credit to our risk team,” Staley said.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.