Barclays seen cutting more costs after profit drop

Mon Feb 10, 2014 9:13am EST
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By Steve Slater

LONDON (Reuters) - Barclays (BARC.L: Quote) said earnings dropped by a quarter to 5.2 billion pounds ($8.5 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 pounds and a statutory profit of less than 100 million, 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 150 billion pounds or more, which could be taken positively by investors.

After raising 6 billion pounds from shareholders in October, Barclays said it would cut the size of its balance sheet by 65-80 billion pounds 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.   Continued...

Logos are seen outside a branch of Barclays bank in London July 30, 2013. REUTERS/Toby Melville