Barclays' investment bank outshines overall profit drop

Wed Apr 24, 2013 5:10am EDT
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By Steve Slater

LONDON (Reuters) - British bank Barclays' (BARC.L: Quote) investment banking division beat expectations in the first quarter, outshining the wider group's earnings drop and sending its shares to a 6-week high.

Overall profits at Britain's third-largest bank were down a quarter from a year ago, it said on Wednesday, due to the costs of new Chief Executive Antony Jenkins' plan to overhaul the lender after a series of scandals involving interest rate fixing, mis-selling of products and boardroom excess.

But investors shrugged off the dip, focusing instead on the investment bank, where earnings were up 11 percent, outperforming rivals Morgan Stanley (MS.N: Quote) and Goldman Sachs (GS.N: Quote) and accounting for most of Barclays' profit.

"The big success story is, as ever Barclays Capital. It's quite a remarkable number that, if you adjust to underlying profit, Barcap now accounts for 62 percent of group profits and the number came in 10 percent better than consensus," said Ian Gordon, analyst at Investec.

"Importantly it's both a revenue and a cost story."

Over half a billion pounds was spent in the first quarter of this year on Jenkins' "Project Transform", triggering a drop in adjusted pretax profit to 1.79 billion pounds ($2.7 billion), just below a mean forecast of 1.85 billion from analysts.

The investment bank made a profit of 1.3 billion pounds in the first quarter by keeping revenues steady and cutting costs. Income rose 1 percent to 3.5 billion pounds, higher than the 3.3 billion expected by analysts. Growth in equities and advisory offset a fall in fixed income, currencies and commodities.

Barclays said the good start to the year had continued into the second quarter across its businesses.   Continued...

A man passes automated teller machines at a Barclays bank branch in London August 30, 2012. REUTERS/Neil Hall