By Steve Slater
LONDON, April 27 (IFR) - Barclays' investment bank profitsfell 31% in the first quarter from a year earlier as a strongperformance in credit was offset by lower revenue in all otherareas and losses on loans to oil and energy firms.
The British bank said on Wednesday its corporate andinvestment bank (CIB) unit made a profit of £701m in the firstthree months of this year, producing an underlying return ontangible equity of 7.3% in the quarter, down from 10.7% a yearago and below its target.
It was hit by £95m of impairment losses, compared with nonea year ago, mainly due to clients in the oil and gas sector. Thebank had £18.2bn of exposure to oil and gas clients at the endof last year, which it said was manageable.
Chief executive Jes Staley, who started in December andpreviously ran JP Morgan's investment bank, said Barclays hadoutperformed rivals in a tough investment banking market.
"We think we've picked up significant market share so we'repleased by that," Staley told reporters on a conference call.
"But we fully recognise that the industry has a way to go torespond to the structural impairment that is a headwind for theindustry. We're not satisfied by the level of profitability wehave in our corporate and investment bank, but we are encouragedby our relative performance in the first quarter," he said.
CIB's revenues dipped 4% to £2.6bn.
"IB (is) strong on a relative basis in a challengingquarter," said Joseph Dickerson, analyst at Jefferies.
Barclays' fixed income, currencies and commodities (FICC)revenues were up 2% from a year ago, easily outperforming a 26%drop in FICC across the five major US investment banks. Revenuesin credit jumped 46%, thanks to a strong performance in US flowbusiness on the back of increased market volatility.
Equities revenues fell 13%, in line with the fall at USbanks, hurt by weak equity derivatives.
Advisory and investment banking fees dipped 12%, not as badas a 23% fall at US banks, as a slump in debt and equityunderwriting outweighed higher advisory fees.
Staley said the bank's relative performance in debt capitalmarkets and leveraged finance had been particularly strong.
The bank was more cautious than some of its US rivals on itsperformance in April, saying CIB's income so far this month wasslightly down on the run-rate in the first quarter.
Barclays reported a 25% drop in pre-tax profit across thegroup, dragged down by an £815m pre-tax loss by its non-coredivision, which includes £51bn of assets it is trying to get ridof. Its shares were 1.8% higher by 10.45am in London.
It has started exclusive talks to sell its French retailunit to AnaCap Financial, after years of trying to sell thebusiness. A sale would mark its exit from retail banking inContinental Europe after already selling out in Spain, Portugaland Italy. Barclays plans to keep its corporate and investmentbanking in France.
Staley is attempting to accelerate the bank's restructuringto create a leaner and more profitable bank. In investmentbanking, he has quit Russia, Brazil and seven countries in Asiaand said he will close cash equities in Asia and shut preciousmetals. Barclays is also selling a portfolio of derivativesproducts to JP Morgan. (Reporting by Steve Slater)
Barclays (BARC)