Barclays investment bank makes first Q4 loss in three years

By Steve Slater

LONDON, Feb 22 (IFR) - Barclays (LSE: BARC.L - news) ' corporate and investment bank made a loss in the final quarter for the first time in three years, as income fell in trading, equities and banking and it took a loss on UK construction firm Carillion (Frankfurt: 924047 - news) .

Barclays said there were signs of improvement, however, and its trading revenues so far this year were ahead of the same stage in 2017.

Investors were encouraged by that, and the UK bank's pledge to restore a full dividend as its capital position strengthened, and its shares rose 4% in early trading on Thursday.

Barclays said CIB made a £252m pre-tax loss in the fourth quarter, compared with a £155m profit a year earlier. It was CIB's first quarterly loss since the final quarter of 2014.

CIB's fourth-quarter revenues fell 11%, while expenses were 4% higher. The bank awarded £1.5bn in bonuses to staff for 2017, down 2% from 2016, and much of that is booked in the final quarter.

"We think the compensation reflects the performance of the bank," chief executive Jes Staley told reporters on a conference call. "Our cost/income ratio improved and our capital position improved quite significantly, so we're fine with where the comp levels came out."

Revenues fell in all areas of the investment bank in the final quarter, partly because a drop in the value of the US dollar translated into lower reported revenues in sterling.

Banking fees - including from M&A advisory and debt and equity underwriting - fell 7% from a year ago to £605m. That underperformed its big US rivals, which on average reported a 19% rise in revenues.

Barclays' equities revenues fell 12% on the year to £362m, compared with an average 7% decline at US banks.

In trading, Barclays' macro and credit revenues were £607m in the fourth quarter, down 21% from a year earlier.

That reflected a tough quarter across the industry as banks said a lack of market volatility hurt volumes. US banks' FICC trading revenues fell 31%, and Barclays said it had won market share.

Barclays said when reported in US dollars, its banking fees were up 2% on the year, equities revenues were down 4% and credit and rates were down 14%.

"We feel very good about the underlying performance of all those lines," said finance director Tushar Morzaria.

CIB's credit loss was also £91m higher in the fourth quarter than in the third quarter, which the bank said was mainly related to its exposure to Carillion, which collapsed in January.

The weak end to the year cut CIB's pre-tax profit in 2017 to £2.06bn, down 22% from 2016. Macro (Shenzhen: 000533.SZ - news) and credit trading revenues fell 18% over the year, equities revenues dropped 9% and banking fees rose 9%.

Barclays posted an underlying pre-tax profit of £3.5bn for 2017, up from £3.2bn in 2016. But it made a £1.9bn net loss in 2017 after including a £901m writedown due to US tax reforms, a £2.5bn charge related to the sale of Barclays Africa, and £1.2bn of litigation and conduct charges.

It also booked an additional £240m provision relating to alleged foreign exchange manipulation.

But the bank said it would resume a full dividend of 6.5p per share in 2018, and could return excess cash in other ways, such as with a share buyback. (Reporting by Steve Slater)