Barclays CIB profits fall 31% as oil losses bite

By Steve Slater

LONDON, April 27 (IFR) - Barclays (LSE: BARC.L - news) ' investment bank profits fell 31% in the first quarter from a year earlier as a strong performance in credit was offset by lower revenue in all other areas and losses on loans to oil and energy firms.

The British bank said on Wednesday its corporate and investment bank (CIB) unit made a profit of £701m in the first three months of this year, producing an underlying return on tangible equity of 7.3% in the quarter, down from 10.7% a year ago and below its target.

It (Other OTC: ITGL - news) was hit by £95m of impairment losses, compared with none a year ago, mainly due to clients in the oil and gas sector. The bank had £18.2bn of exposure to oil and gas clients at the end of last year, which it said was manageable.

Chief executive Jes Staley, who started in December and previously ran JP Morgan's investment bank, said Barclays had outperformed rivals in a tough investment banking market.

"We think we've picked up significant market share so we're pleased by that," Staley told reporters on a conference call.

"But we fully recognise that the industry has a way to go to respond to the structural impairment that is a headwind for the industry. We're not satisfied by the level of profitability we have in our corporate and investment bank, but we are encouraged by our relative performance in the first quarter," he said.

CIB's revenues dipped 4% to £2.6bn.

"IB (is) strong on a relative basis in a challenging quarter," said Joseph Dickerson, analyst at Jefferies.

Barclays' fixed income, currencies and commodities (FICC) revenues were up 2% from a year ago, easily outperforming a 26% drop in FICC across the five major US investment banks. Revenues in credit jumped 46%, thanks to a strong performance in US flow business on the back of increased market volatility.

Equities revenues fell 13%, in line with the fall at US banks, hurt by weak equity derivatives.

Advisory and investment banking fees dipped 12%, not as bad as a 23% fall at US banks, as a slump in debt and equity underwriting outweighed higher advisory fees.

Staley said the bank's relative performance in debt capital markets and leveraged finance had been particularly strong.

The bank was more cautious than some of its US rivals on its performance in April, saying CIB's income so far this month was slightly down on the run-rate in the first quarter.

Barclays reported a 25% drop in pre-tax profit across the group, dragged down by an £815m pre-tax loss by its non-core division, which includes £51bn of assets it is trying to get rid of. Its shares were 1.8% higher by 10.45am in London.

It has started exclusive talks to sell its French retail unit to AnaCap Financial, after years of trying to sell the business. A sale would mark its exit from retail banking in Continental Europe after already selling out in Spain, Portugal and Italy. Barclays plans to keep its corporate and investment banking in France.

Staley is attempting to accelerate the bank's restructuring to create a leaner and more profitable bank. In investment banking, he has quit Russia, Brazil and seven countries in Asia and said he will close cash equities in Asia and shut precious metals. Barclays is also selling a portfolio of derivatives products to JP Morgan. (Reporting by Steve Slater)