Barclays quarterly profits soar as trading activity boosts investment banking

Barclays profits more than quadrupled in the fourth quarter as the deal boom boosted its investment bank, while also freeing up more reserves it had set aside to cover loan losses. potential pandemic related.

The Bank of England said on Wednesday the bank of England said net income of £1.1 billion was up from £220 million in the same period a year earlier, beating analyst expectations of £643 million. Revenue rose 4.4 per cent to £5.2 billion, slightly above estimates of £5.1 billion, largely due to a recovery in consumer spending at the UK’s retail banking UK and international credit card business.

Much of the performance, however, is due to a one-time release of £31m of loan loss provision set aside for defaults due to the coronavirus lockdown, which is no longer required as the economic outlook improves. This compares to the £492 million for people with disabilities added in the same period in 2020.

Analysts also expressed concern about the sharp drop in the investment bank’s trading revenue late last year, compared with its rivals on Wall Street and across Europe.

Jefferies analyst Joseph Dickerson said: “UK revenue and cards offset weaker market performance and costs were contained. He described it as a “solid quarter” with the bank’s lending business positioned to benefit from rising interest rates.

Barclays said it would pay a total dividend of 6 pence a share for 2021 and repurchase another £1 billion of shares in addition to the £500 million already announced. Its shares rose 2.9%.

The result is a first under the leadership of CS chief executive Venkatakrishnan, the lender’s former chief risk officer and chief transaction officer. Venkatakrishnan replaced Jes Staley in November after Staley resigned amid an investigation by UK regulators into his past relationship with convicted sex offender Jeffrey Epstein.

The Financial Times reported that when Staley joined JPMorgan Chase a few years ago, he exchanged 1,200 emails with Epstein over a four-year period, with content including unexplained terms, such as “snow white”.

The cache is at the heart of regulators’ concerns about how Staley misrepresented his close relationship with the deceased financier. Staley is examining preliminary conclusions.

Barclays’ board separately announced that it had frozen Staley’s uninvested share bonus of millions of pounds until the outcome of a regulator’s investigation.

Venkatakrishnan, who worked with Staley at JPMorgan, has vowed to stay at the core of his predecessor’s strategy, which was based on building the investment bank into a viable competitor to Wall Street. He said he withdrew himself from any discussion or board decision about Staley because of their longstanding relationship.

In 2020 and much of 2021, investment banking revenue spiked as market turmoil during the height of the pandemic, followed by a record deal boom that lifted the advisory unit. However, this is now showing signs of fading.

Profit before tax at the investment bank rose 32 per cent to £1 billion in the quarter, beating analyst expectations of £753 million. However, this was largely due to lower costs, while revenue was flat at £2.6 billion, missing forecasts.

Fees from capital markets and M&A rose 27% to £956m, in line with the big gains Wall Street rivals offered earlier this month.

However, the transaction side was disappointing. Revenue fell 23% to £1 billion as market volatility returned to normal following the chaos of late 2020.

Fixed income revenue fell 33% – double the average drop for US rivals and worse than any other European bank besides the crisis-hit Credit Suisse – while shares fell 8% from gains 1% on Wall Street, analysts at Citigroup note.

“We are the sixth ranked bank [globally] and we have an unwavering commitment to the business,” said Venkatakrishnan when asked about earnings sustainability in the volatile sector. “I am very confident that the process of improving market share is continuing.”

Barclays has also increased its bonuses for 2021 by almost a quarter to £1.9 billion, a more conservative increase than its US peers. This “might raise questions about competitiveness given higher compensation guidelines at peers, such as JPMorgan,” said Citi analyst Andrew Coombs.

For the full year, Barclays net profit rose to a record £6.3 billion in 2021 from £1.5 billion in 2020, and the bank generated a 13.4% return on equity. possess. A key reason for the dramatic shift is that the bank has released a loan of £653 million in 2021 compared with the addition of £4.8 billion in provisions in 2020 at its peak. epidemic.

Barclays also said its chief financial officer Tushar Morzaria will retire in April and be replaced by his deputy, Anna Cross.

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