First-quarter profits at Barclays slide

Barclays, trying to stanch an exodus of senior dealmakers, posted a bigger- than-estimated drop in first-quarter profit as a fall in revenue from trading bonds, currencies, and commodities cut earnings from the investment bank by 49%.

Pretax profit, excluding swings in the valuation of the lender’s debt, fell 5% to £1.69bn (€2bn), missing the £1.82bn estimate of analysts provided by the bank, Barclays said in a statement.

Income from the bank’s fixed income, currencies and commodities business, known as FICC, traditionally the largest source of revenue for the investment bank, fell 41% to £1.2bn.

The investment bank results are “much worse than I expected,” said Chirantan Barua, an analyst at Sanford C Bernstein in London, who rates Barclays a “market perform”.

CEO Antony Jenkins will announce details tomorrow of how he will overhaul the investment banking division.

He is trying to revive the unit’s profitability by cuttings costs, in particular compensation, without losing key dealmakers.

In the past week, he has lost Hugh ‘Skip’ McGee, the firm’s most senior banker in the US, Robert Morrice, chairman of the Asia-Pacific region, as well as Ros Stephenson, theinvestment-banking chairman.

“We are obviously going though a number of changes as part of our strategic review and that may or may not have prompted some people to move on,” finance director Tushar Morzaria said yesterday.

The stock fell 2.7% to 251.55p in London trading, bringing its decline for the year to 7.7%. That makes it the second-worst performing UK bank stock this year after HSBC Holdings, which has slid 8.9%.

Pretax profit at the investment bank fell 49% to £668m from £1.32bn. Income from equities and providing services to hedge funds — so-called prime services — fell 5% to £674m in the quarter, hurt by declines in cash equities and equity derivatives.

Barclays “took the pain, not only in FICC but equities and prime services as well: down 5% when it has been up 20 % plus for two years in a row,” Barua said. “That’s worrying.”

By comparison, UBS reported a 38% decline in revenue at its foreign exchange, rates and credit division in the first quarter, the Zurich-based bank said in a statement yesterday.

Compensation as a proportion of revenue at Barclays’s investment bank climbed to 46% in the quarter from 41%.

Net income rose 15% to £965m in the quarter.