Barclays to wield axe after more setbacks at investment arm

6th May 2014, Comments 0 comments

Britain's scandal-hit Barclays bank on Tuesday revealed that first-quarter profit almost halved at its embattled investment banking arm, where the group is set to axe jobs in a major shake-up.

Pre-tax profit at the investment arm dived 49 percent to £668 million ($1.13 billion, 812 million euros) in the three months to March from the level a year earlier.

Performance was hit by sliding revenue at its Fixed Income, Currencies and Commodities (FICC) trading business, the bank said in a results statement.

On Thursday, Barclays will announce plans to shrink the struggling investment banking division to boost profitability and repair the group's tarnished reputation.

"I will update the market on Barclays' strategy to deliver improved and sustainable returns and growth for our shareholders," said chief executive Antony Jenkins in the statement.

"This plan will address issues underlying the performance challenges we have recently experienced, including positioning the investment bank for the new operating and regulatory environment."

Barclays is still seeking to fix a reputation badly damaged by its role in the Libor interest rate-rigging scandal of 2012, while it has also been probed along with other banks over possible manipulation of foreign exchange trade.

British media have meanwhile reported that Barclays could announce on Thursday the creation of a so-called "bad bank" to offload non-core assets, alongside plans to possibly axe thousands more jobs.

Jenkins has already said that as many as 12,000 jobs would go worldwide this year out of a global workforce of about 139,000. He has said that some 7,000 would disappear in Britain. Thursday's update could increase the number of lay-offs, according to reports.

Barclays meanwhile increased the money available for staff bonuses by almost 10 percent earlier this year, angering politicians and unions.

- Further profit slide -

The group added on Tuesday that adjusted pre-tax profit -- stripping out fluctuations in the value of its own debt and provisions to reimburse customers for mis-sold products -- dipped 5.0 percent to £1.69 billion in the first quarter.

On a brighter note, net profits or earnings after tax rose 15 percent to £965 million in the reporting period.

That was helped by falling costs, lower impairment charges and changes in the value of the group's debt.

Operating expenses were cut by 16 percent to £4.435 billion amid a group restructuring programme.

There were no additional provisions for the compensation of customers who were mis-sold payment protection insurance - a scandal that has blighted Britain's banks in recent years.

Turning to the outlook, Barclays said it remained "cautious about the trading environment".

It added: "We remain focused on structurally reducing the cost base in order to improve returns."

- Shares slide before update -

Barclays' share price sank 4.60 percent to stand at 246.6 pence around midday in London, as traders nervously awaited this week's strategy update.

"General sentiment towards the stock remains poor," said Rebecca O'Keeffe, head of investment at online broker Interactive Investor.

"Cautious investors are also likely to be wary of taking a position ahead of Thursday's major strategy announcement -- which should provide a much clearer indication on Barclays' future profits and prospects."

London's FTSE 100 index of top companies, on which the group is listed, was down 0.12 percent at 6,814.25 points.

The rate-rigging scandal erupted two years ago when Barclays was fined £290 million by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009. Euribor is the eurozone equivalent of Libor.

In addition, Barclays was last year forced into a huge £5.8-billion shares sale, or rights issue, to meet regulatory demands to strengthen its capital buffers.

Barclays is reshaping itself under Jenkins, who replaced Bob Diamond as chief executive in the wake of the Libor crisis.

Diamond, who headed the investment unit before becoming CEO, was one of the world's highest paid bankers before and after the global financial crisis and helped to turn Barclays into a global player in investment banking.

© 2014 AFP

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