Barclays' depressing fourth quarter

STEVE SLATER
Last updated 09:00 11/02/2014

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Barclays said earnings dropped by a quarter to £5.2 billion ($10.3 billion) last year from the year before, missing analysts' forecasts and raising expectations the bank will step up cost cutting as investment bank earnings wane.

The British bank will not report its full results until Tuesday, but it released the headline number early on Monday. A preview in the Financial Times newspaper had included numbers close to the figures released by Barclays.

The earnings show Barclays had a grim fourth quarter, with an adjusted profit of about £200 million ($397 million) and a statutory profit of less than £100m, as investment banking income slumped and it took further charges related to a clean up of the banking industry in the wake of the 2008 financial crisis.

Barclays was rocked by a fine for rigging Libor interest rates in 2012 which cost its chairman and chief executive their jobs and showed the bank's UK regulator had long had concerns over its business culture.

Chief executive Antony Jenkins subsequently took the helm, tasked with cleaning up standards and improving returns, and though he is regarded as having acted more decisively than many rivals, he continues to be dogged by past problems and has warned cultural change could take 10 years.

Most focus on Tuesday will be on what Jenkins plans to do to increase cost savings - which could include hundreds of job cuts - and shrink Barclays' investment bank. He is attempting to improve profitability, cut risk and reduce the bank's leverage.

Morgan Stanley analyst Chris Manners said Barclays may target cutting its balance sheet by £150b or more, which could be taken positively by investors.

After raising £6b from shareholders in October, Barclays said it would cut the size of its balance sheet by £65-80b and Jenkins is expected to increase that target to improve his bank's leverage ratio - a key focus for regulators eager for the industry to reduce its risks.

Jenkins is expected to increase cost savings targets beyond the £1.7b in annual savings unveiled a year ago.

Barclays shares were up 1.6 per cent at 276 pence ($5.48) by 1300 GMT, outperforming a weaker European bank index, as dealers said news on efforts to improve returns would be more important than last year's results.

IMPROVING CULTURE
Barclays has cut about 400 jobs in its investment bank in the last two weeks and plans to cut a similar number in its corporate bank.

Jenkins has made no secret that he intends to significantly cut staff and branches over the medium-term to improve efficiency.

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Investment bank income is likely to have dropped to £1.9b in the fourth quarter, Morgan Stanley analysts estimated.

That would be Barclays' weakest quarter for two years and follow a slump in fixed income revenue, which has already been shown by rivals including Deutsche Bank.

Barclays is expected to increase the bonus pool for staff to more than £2b for 2013, from £1.85b in 2012, citing the need to retain US bankers in a competitive market.

Barclays had been expected to report adjusted profit before tax of £5.4b for 2013, according to the average forecast from analysts polled by the bank.

The only other number released on Monday was a statutory pretax profit of £2.9b for 2013.

The bank had already said it would take a £330m charge in the fourth quarter to cover litigation and regulation penalties.

Jenkins is also due to set new targets on how staff conduct themselves as he tries to improve culture following a string of industry scandals.

His attempts to restore confidence and put past problems behind him suffered another setback at the weekend, however, after a report said details of 2,000 customers had been stolen and sold to rogue investment advisers.

Confidential information on customers' earnings and finances had been sold, The Mail on Sunday reported, citing data provided to it by a whistleblower.

The report said it was a sample from a database that included details of 27,000 customers.

Barclays said the issue appeared to involve criminal action and it was co-operating with an investigation by police and the financial regulator, which could impose a hefty fine on Barclays if the bank is at blame.

- Reuters

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