Barclays Plc’s traders surpassed expectations in the first quarter with a surprise increase in fixed income revenue, helping offset falls in equities trading and dealmaking.
(Bloomberg) — Barclays Plc’s traders surpassed expectations in the first quarter with a surprise increase in fixed income revenue, helping offset falls in equities trading and dealmaking.
Fixed-income trading revenue rose 9% to £1.79 billion ($2.2 billion), compared to a 11% fall expected by analysts. Equities trading, though, fell a worse-than-expected 33% to £704 million, falling short of a blowout quarter a year ago.
The trading results also helped offset a drop in dealmaking fees and take overall pretax profit to £2.6 billion, beating expectations, according to analyst estimates compiled by Bloomberg.
“The momentum across the group allows us to maintain a robust capital position, deliver attractive returns to shareholders, and support our customers and clients through an uncertain economic environment,” Chief Executive Officer C.S. Venkatakrishnan, who completed cancer treatment earlier this year, said in a statement on Thursday.
Barclays is the second major UK bank to report earnings, following Standard Chartered Plc yesterday, as investors seek more clarity on the health of the global economy and lenders’ readiness for any distress.
Still costs disappointed, with total operating expenses at the UK unit up 9% to £1.1 billion due to the impact of inflation. The lender said its digitization effort would result in savings over time.
Shares in the lender, which reiterated earlier guidance that it would target a return on tangible equity of more than 10% in 2023, rose 2.2% at 8:13 a.m. in London.
What Bloomberg Intelligence Says
Barclays’ 23% beat on FICC revenue in 1Q confirms strength in the investment bank’s franchise, while adding diversification to income as interest-rate driven upgrades fade. At £1.8 billion, the 9% year-over-year rise is ahead of most peers across Europe and the US, but was offset by equities, down 33%. Costs disappointed, missing estimates by 5%, with the efficiency ratio dipping to 57%, vs. a low-60’s target.
— BI analyst Philip Richards
Barclays reported provisions for souring loans of £524 million, more than three times higher than a year ago but slightly better than estimates. The bank said the rise reflected “continuing normalisation anticipated in US cards delinquencies.”
Transaction banking income rose 68%, the best first-quarter performance since at least 2014.
The absence of deals and financing activity has meant traders rather than rainmakers are driving the performance of the investment bank. Barclays joins most major Wall Street banks benefiting from market volatility in fixed income as traders bet on rapidly changing interest rates and inflation.
Investment banking fees decreased 7%, reflecting muted market-wide activity. But that was better than many rivals with the bank saying a strong performance in advisory helped partially offset the decline.
Rising rates also helped Barclays to improve margins in its UK retail business, where total income rose 19% to almost £2 billion. The unit’s net interest margin was 3.18%.
Group deposits rose by about £10 billion in the quarter, while rivals including Deutsche Bank AG saw declines. A liquidity crisis started by Silicon Valley Bank in the US sent clients fleeing to safety.
On a media call, Venkatakrishnan said its UK retail bank hadn’t experienced the liquidity pressures seen at some US banks.
Other highlights from Barclays’s earnings in the first quarter include:
- CET1 ratio of 13.6%
- Corporate lending income decreased 24% to £95 million
- Consumer, cards and payments income increased 47% to £1,306 million
–With assistance from Donal Griffin.
(Updates with details from results throughout)
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