Barclays to deepen cuts if ‘challenging’ times continue
Barclays has raised the prospect of deeper cost-cutting at the bank should a “challenging income environment” continue.
The bank used its first quarter results to warn it would go further to boost profitability and meet targets this year after underlying earnings fell 10% in the first three months of the year to £1.5bn.
That compared to £1.7bn in the same period in 2018.
Barclays blamed the performance on its investment banking arm and revealed it had already cut bonuses and wider compensation at the division as a result.
Its international business reported a 20% fall in underlying earnings.
Barclays chief executive, Jes Staley, said: “Three years ago, we took a charge of just under £400m to allow us to better align variable compensation accruals with the firm’s revenues.
“What you see in the first quarter is Barclays using this discretion around variable compensation to manage our costs and deliver expected profitability.”
Barclays will hope that its action will take some of the pressure off as activist investor Ed Bramson, who holds a 5.5% stake, takes his fight for a seat on the board to the bank’s AGM next week.
He is demanding the investment arm is heavily pruned to boost group returns.
On a bottom-line basis, which includes one-off costs, the group swung to a £1.5bn pre-tax profit following a loss in the first quarter last year when it booked around £2bn of conduct and litigation charges.
Shares were down 2% in early trading but later extended those losses to 3% by lunchtime.
Commenting on the performance Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “These are a messy set of results, the non-recurrence of massive conduct charges has boosted reported numbers, while one-off write backs in US loans are negatively impacting the underlying figures.
“Sweep all that aside though and eyes will focus on the poor results from the investment bank.
“A poor result from the investment bank isn’t a great surprise, international rivals have flagged pretty tough conditions across the market and Barclays is keen to point to a growing share of global banking fees.
“But despite a better than expected result in fixed income trading, today’s numbers will do little to take the pressure from activist Edward Bramson off the board.”