Barclays first-quarter profit falls 33 percent as investment banking slowdown bites

A view of the exterior of the Barclays U.S. Corporate headquarters in the Manhattan borough of New York City, May 20, 2015. REUTERS/Mike Segar

Barclays (BARC.L) reported a worse than expected 33 percent slump in pretax profits for the first three months of the year, as the lender followed its U.S. peers in reporting falling investment banking revenues in a weak global market environment.

Barclays said first quarter pretax profits fell to 793 million pounds ($1.15 billion), just below the average forecast of 846 million pounds from analysts polled by the company.

Investment banking profits fell by 31 percent for the quarter, driven by reduced trading activities and rising bad loans from exposure to the troubled oil and gas sector.

Barclays had flagged the poor performance in its investment banking division, warning on Apr. 5 that it expected weak results in the unit compared to the same period in 2015.

The lender also said it is in discussions to sell its French retail banking operations to AnaCap Financial Partners, as part of a plan to shed so-called ‘non-core’ assets a bid to cut costs and restore profits.

The restructuring announced on Mar. 1 saw the British lender announce plans to sell its 62 percent stake in Barclays Africa Group (BGAJ.J) over the next two to three years, exiting the continent in order to focus on the UK and the United States.

The bank said performance of its two core units, Barclays UK and Barclays Corporate and International, was strong with an aggregate 9.9 percent return on equity, driven by the UK business, which posted a 20.5 percent standalone return.

Total income at the bank’s Consumer, Cards and Payments unit increased 24 percent to 917 million pounds, reflecting continued growth in Barclaycard US and Germany.

“The performance of the core today shows the potential power of the group once it is freed from the drag of non-core,” Chief Executive Jes Staley said in a statement marking the first results since it launched its ‘transatlantic’ strategy.

The plan came at a cost to shareholders, with Barclays cutting its dividend for 2016 to 3 pence per share from 6.5p in 2015 in a bid to maintain capital levels while shedding unwanted assets.

Analysts at Bernstein warned of tough times ahead, pointing to the potential for a spike in credit card impairments risk, weak investment banking performance and the uncertainty of disposals that Barclays is betting on to shore up its capital.

Barclays’ common equity Tier 1 (CET1) ratio, a key measure of financial strength, fell to 11.3 percent in the first quarter from 11.4 percent at the end of 2015.