Barclays Investment Bank Profit Drops 50% on Trading Decline

Jul 30, 2014 4:07 am ET

(Updates with investment-banking fees in sixth paragraph.)

July 30 (Bloomberg) -- Barclays Plc, the U.K.’s second- largest lender, reported a 50 percent plunge in second-quarter profit at its investment bank as it made less money from equities and currencies.

Pretax profit at the unit fell to 567 million pounds ($961 million) from 1.14 billion pounds a year earlier, the bank said in a statement today. A 16 percent drop in second-quarter markets income was exacerbated as fewer clients traded in cash equities, rates and currencies, it said.

Barclays has struggled to reduce its dependence on the investment bank, which once accounted for more than half of profit and assets. Chief Executive Officer Antony Jenkins, 53, who took over after the lender was fined 290 million pounds in 2012 for rigging the London interbank offered rate, has eliminated jobs and cut costs by stripping out layers of management to restore investor and regulator confidence.

“Performance in the investment bank was impacted by the repositioning under way as well as difficult trading conditions in the quarter, but it is where we expected it to be at this point,” Jenkins said in the statement.

Bad Bank

As part of his overhaul, Jenkins set up a bad bank to dispose of 115 billion pounds of assets, including complex derivatives from the lender’s fixed-income, currencies and commodities unit and the European consumer arm.

Operating expenses at the investment bank rose 12 percent to 1.59 billion pounds related to the restructuring of the unit, litigation and conduct costs, Barclays said.

The declines at the Barclays unit for the second quarter were cushioned by a 35 percent increase in investment banking fee income to 661 million pounds, fueled by advisory, debt and equity capital markets. That’s in line with its peers including Germany’s Deutsche Bank AG and UBS AG, based in Zurich, who both reported gains in those businesses yesterday.

U.S. securities firms also reported earnings were boosted by investment banking. New York-based Morgan Stanley, owner of the world’s largest brokerage, said earlier this month that investment-banking revenue jumped 33 percent in the second quarter.

--With assistance from Richard Partington in London.