Barclays profit declines 8% as fixed income traders fall short

Bloomberg

Barclays Plc slumped after posting a surprise drop in profit as revenue missed estimates across every major business line.
Inside the corporate and investment bank, dealmakers faced a continued drought, traders fell short of hopes and the bank recorded further losses tied to its leveraged finance portfolio. At the firm’s UK franchise, the net interest margin — a key measure of profitability — got less of a boost from rising interest rates than expected.
“Barclays has bitterly disappointed the market with its full year numbers,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said in a note. “In the shorter term the market needs more convincing that it’s on the right track.”
The worse-than-expected results capped a year in which Barclays faced a litany of charges tied to litigation and conduct, partly to cover buying back US investment products it mistakenly oversold as well as a settlement for a long-running probe into staffers’ usage of unapproved messaging channels.
Shares were down 9.8% in London, the most since April 2020. The drop erased more than half of their gains so far this year and made Barclays the worst performer in the FTSE 100.
Barclays said it would start to buy back as much as £500 million of shares in the first quarter. While that was in line with consensus, it comes at a time when the firm’s European rivals have boosted payouts.
The buyback “is not good enough in our view,” Joseph Dickerson, an analyst at Jefferies Financial Group Inc, said in a note to clients.
After total costs rose 6% to £4 billion for the final three months of the year, the firm said it would spend even more this year on its corporate and investment banking unit as well as the consumer cards
and payments division, which counts JetBlue Airways Corp and Gap Inc as partners. Still, the cost-to-income ratio, a measure of how much it spends to produce a dollar of revenue, should fall, Barclays said.
Chief Executive Officer CS Venkatakrishnan also said the bank was committed to investing in dealmaking talent, even after an industrywide slump in deals meant investment banking fees declined to £480 million in the final three months of the year.
“We are cautious about global economic conditions, but continue to see growth opportunities across our businesses through 2023,” Venkatakrishnan — who is currently undergoing treatment for a form of cancer — said.
During the final three months of the year, Barclays was forced to record a £85 million writedown tied to its portfolio of leveraged loans, sparking a £128 million loss in corporate lending. The bank has cut that portfolio in half since last June.
“The overall environment for banking that’s clearly been difficult and leveraged finance is no different,” Finance Director Anna Cross said in a conference call with journalists.