By Lawrence White and Sinead Cruise
LONDON (Reuters) -Barclays reported a 12% fall in first quarter profit on Thursday, as a squeeze on UK mortgage pricing, lower income from trading and a drought of M&A fees showed the difficulties it will face in delivering its first strategic revamp in a decade.
The British bank reported pretax profit for the January-March period of 2.3 billion pounds ($2.84 billion), down from 2.6 billion pounds a year ago and narrowly above analysts’ forecasts for 2.2 billion.
Barclays is bidding to restore investor faith in its universal banking business model, after years of share price underperformance, clashes with activists over the role of its investment bank, and management turnover.
Its shares were trading 2.8% up at 0806 GMT compared with a 0.6% rise in the .
The British bank said in a long-awaited strategy review on Feb. 20 it would invest in its high-returning domestic banking business, as well as axing 2 billion pounds of costs and ramping up payouts to shareholders.
The results update on Thursday was the first under the lender’s new structure, reorganised into five operating divisions instead of three in an attempt to provide clearer disclosure on performance and management accountability.
The lender now reports results for Barclays UK, Barclays UK Corporate Bank, Private Bank and Wealth Management, Investment Bank, and U.S. Consumer Bank.
All five business divisions reported lower returns on tangible equity (ROTE) than their first-quarter 2023 comparisons, with the UK Corporate Bank the laggard of the set, posting ROTE of 15.2% from 21.7% a year ago.
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Income in the UK bank division, which specialises in consumer and home loans, also fell 7%, amid increased competition in the mortgage market and as savers moved money to higher-returning products.
INVESTMENT BANK STRUGGLES
Total investment bank income also fell 7%, just shy of expectations, and the unit’s overall ROTE of 12% was 2.4% percentage points lower than the first quarter of 2023. Still, the performance of the under-pressure unit was in line with its long-term target.
Barclays said income in its traditionally strong Fixed Income, Currencies and Commodities (FICC) unit fell 21% as clients’ trading slowed and against a strong year-ago comparison.
Investment banking advisory fees slid 30% as it failed to capture merger advisory fees.
Equities revenue rose 25%, meanwhile, as the bank performed strongly in both derivatives and cash equities trading.
Barclays’ investment bank performance overall lagged rivals on Wall Street, where the top five players on average saw FICC trading revenues fall 3%, equities rise 6%, and investment banking fees rise 25%, according to research from Jefferies.
Rival Deutsche Bank on Thursday posted a better-than-expected 10% increase in first-quarter profit, citing a bounce back in fixed-income trading and deal-making revenue at its investment banking division.
The British bank also said it had on Wednesday announced its Irish unit, which houses much of its European business, would sell an Italian retail mortgage book in line with aims to simplify its exposures.
The deal will conclude in the second quarter of this year, generate a pretax loss of around 225 million pounds and be neutral to the bank’s capital levels, Barclays said.
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($1 = 0.8017 pounds)
