Barclays Traders Beat Estimates with Surprise Surge in Unit Revenue

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(Bloomberg) — Barclays Plc’s traders delivered a surprise jump in revenue for their unit during a volatile first quarter, helping offset a quieter period for the bank’s dealmakers and a charge for accidentally overselling U.S. securities.

Revenue from fixed-income, currency and commodities trading soared 37% to 1.6 billion pounds ($2 billion), defying expectations of a decline and beating an unexpectedly strong three months for Wall Street. Equities income also rose 13%.

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Overall revenue for the corporate and investment bank increased about 10% to 3.9 billion pounds, with investment banking fees falling 25%, less than expected, as dealmaking slowed in the wake of the invasion of Ukraine.

“Our income growth was driven partly by global markets, which has been helping clients navigate ongoing market volatility caused by geopolitical and economic challenges including the devastating war in Ukraine, and by the impact of higher interest rates in the U.S. and U.K.,” said Barclays Chief Executive Officer C.S. Venkatakrishnan.

The London-based bank benefited from an outsized gain on emerging markets rates and currencies, Bloomberg reported last week. Venkatakrishnan also told reporters that Barclays was gaining business in prime brokerage, which caters to hedge funds and other large clients. Competitors including Credit Suisse Group AG have pulled back in the wake of heavy losses linked to the collapse of Archegos Capital Management last year.

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Analysts at Citigroup Inc. said in a note that the magnitude of the investment bank’s “market share gains in the quarter is impressive.”

Shares in Barclays were up 2.1% as of 9:51 a.m. in London.

Group pretax profit fell 7% to 2.2 billion pounds, beating estimates. Impairments for doubtful loans were smaller than expected this quarter due to “a benign credit environment,” though Venkatakrishnan flagged that many customers “are facing far harder conditions this year as a result of inflation, supply chain issues and higher energy costs.”

The bank said its expenses this year would now be 15 billion pounds, following a charge of 523 million pounds this quarter largely for mistakenly issuing more structured notes and exchange traded notes than it had registered for sale. A share buyback, which was delayed in March after the error came to light, will be restarted “as soon as practicable” once Barclays resolves its filing requirements with the Securities and Exchange Commission, it said. 

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“This situation was entirely avoidable and I’m deeply disappointed,” Venkatakrishnan said on a call with journalists, adding he expected the buyback to start toward the end of the first half of the year. He said there was no evidence of misconduct so far, but added: “The necessity of strong controls culture has never been clearer to me.”

Finance Director Anna Cross said that the charge is “our best estimate of the cost at this stage” and that the final impact may differ from the provision taken in the first quarter.

Barclays also confirmed it is going to unwind 1.25 billion pounds of pension plan contributions from 2019 and 2020 that were structured to delay a hit to capital reserves. The Prudential Regulation Authority issued a broadside against such transactions earlier this month.

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The lender said the unwinding, which will result in a roughly 30 basis-point reduction to its CET1 capital ratio, will now start in the fourth quarter, having previously planned to spread it over three years.

Other highlights from Barclays’s earnings in the first quarter include:

Net interest income of 2.34 billion poundsTotal income rose 10% to 6.5 billionBarclays UK profit before tax rose by 29% to 594 million pounds, partly driven by rising interest ratesCredit impairment charges of 141 million poundsCET1 ratio of 13.8%Customer remediation of 181 million pounds, linked to timeshare loans brokered by Azure Services Limited

©2022 Bloomberg L.P.



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