Barclays warns over cost-cutting as profits drop 10%

Banking giant Barclays has warned it may need to slash costs further this year as it revealed first quarter profits dropped 10%.

The lender reported underlying pre-tax profits of £1.5 billion (€1.7bn) for the first three months of 2019, down from £1.7 billion (€2bn) a year ago, after suffering a tough quarter for investment banking.

It cautioned that if the “challenging income environment” continues, it may need to reduce costs again to meet financial returns targets.

The group revealed it had cut bonus and compensation payouts across its corporate and investment bank to reflect the division’s poor first quarter performance.

Jes Staley (Debra Hurford Brown/Barclays/PA)

The figures come amid a battle to fend off pressure from New York-based activist investor Edward Bramson, who is leading an aggressive campaign to muscle his way on to the bank’s board.

Mr Bramson – whose investment vehicle Sherborne Investors owns a 5.5% stake in Barclays – has tabled a resolution at the lender’s upcoming annual general meeting (AGM) to be appointed to the board, having called for the lender to curtail its investment arm and increase returns for investors.

The first quarter figures will be watched closely by Mr Bramson as he steps up his offensive ahead of the May 2 AGM.

On a bottom-line basis, the group swung to a £1.5 billion (€1.7bn) pre-tax profit between January and March, from losses of £236 million (€273m) a year earlier, when it was hit by around £2 billion (€2.3bn) of conduct and litigation charges.

Shares fell 2% after the results.

The difficult first quarter for investment banking left underlying pre-tax profits in its international division tumbling 20% to £1.14 billion (€1.3bn), with income slumping 6% to £3.6 billion (€4.2bn).

The corporate and investment banking business saw a slowdown in trading, but this was partly offset by falling costs as the bank cut bonuses.

Jes Staley, group chief executive of Barclays, said the group had a “weak” quarter for investment banking fees.

But he said the first quarter conditions, that also hit many of the bank’s Wall Street counterparts, may improve as the year plays out.

He added: “What you see in the first quarter is Barclays using this discretion around variable compensation to manage our costs and deliver expected profitability.”

The group’s UK retail banking business saw underlying pre-tax profits edge higher to £588 million (€679m) from £581 million (€671m) a year earlier.

Statutory profits jumped to £585 million (€676m) from £170 million (€196m) a year earlier, when it booked an extra £400 million (€462m) to cover charges for payment protection insurance (PPI) mis-selling compensation.

Next week’s AGM is set to be eventful for Barclays, with pay plans for top bosses also in the spotlight.

Two of the biggest influential shareholder advisory groups – Institutional Shareholder Services (ISS) and Pirc – are recommending investors vote down the remuneration report.

ISS said the bank had taken “inadequate” measures to dock Mr Staley’s pay after he attempted to identify a whistleblower, with a 15 million dollar (€13.4m) fine by US authorities over the matter and personal penalties paid by the bank’s boss.

- Press Association

More on this topic

Increase in shadow banking activities seen as potential threat to Irish economy

ECB: Pricing policy on ‘right course’

New KBC Bank chief says he's ‘comfortable’ with Irish share of mortgage market

Five banks fined €1.07bn by European Commission over foreign exchange cartel

More in this Section

May's loosening grip on power sends sterling plummeting and sinks UK-exposed shares

New house builds ‘to peak at only 25,000’, says country’s largest housebuilder

Blow for Irish retailing staff as Dorothy Perkins-Topshop owner announces store closures

Wholesale woes put brakes on Britvic's Irish growth


This is why Zandra Rhodes thinks it’s important to support young designers

Empty-nester Lorraine Kelly reveals a stylish makeover of her daughter Rosie’s bedroom

Sandal season is almost here: 5 footwear trends to be seen in this summer

From childhood bread baking to exploding seaweed, these are the Hairy Bikers’ food memories

More From The Irish Examiner