Barclays' FICC Slaughtered: Revenue Plummets 41% In Q1

Tyler Durden's picture

So much for the Lehman effect: five years after Barclays acquired Lehman's only valuable asset - its North American brokerage personnel - in a liquidation firesale, the benefits have all but disappeared (confirmed further by the most recent departure of such prominent ex-Lehmanites as Paul Parker, Larry Wiesenck and of course, Skip McGee). Case in point: today's announced earnings, in which we found that Lehman's pre-tax profits slid 5% to £1.69 billion. However, looking at the bottom line, which reflected benefits from cost cuts and loan loss reserve releases, not to mention an "accounting gain on Barclays debt" would surely miss the big picture, which was that the bank's Investment Banking revenue was down 28% £2.49 billion. However the punchline was that core driver of New Normal bank revenues: FICC, which was slaughtered by an unprecedented 41% to to £1.23 billion, coming far worse than even the most dire analyst estimates.

 

This is what Barclays revenue looked like in the context of other banks via Reuters:

The reason for the collapse? "The bank blamed "subdued client activity" and a reorganisation of the business" or roughly what JPM blamed in its Friday afternoon dump when it cut its Q2 market revenue forecast lower by 20%.

Surely the Fed can stop transacting with Citadel and give some trades to Barclays and JPM to help them compensate for the complete collapse in trading volumes by non-central bank entities?

From WSJ:

Revenue fell 41% in Barclays's fixed income, currencies and commodities division, typically its biggest earner, in the first quarter, halving the investment bank's operating profit. It was an even bigger fall than analysts had expected and compared with roughly 20% declines at rivals which have also seen clients pull back from bond trading because of persistently low and stable interest rates.

Barclays executives are now trying to get the business in shape to cope with the slowdown and new banking rules, as part of a broader restructuring to shed thousands of jobs and improve returns across the bank. Chief Executive Antony Jenkins said his new strategy Thursday "will address issues underlying the performance challenges we have recently experienced, including positioning the investment bank for the new operating and regulatory environment."

The lender's CEO is launching a new strategy for its investment bank as a string of its top executives and deal makers are departing, raising fears that clients could take their business elsewhere if the exodus continues. Mr. Jenkins has also been under attack from investors for raising bonuses at the investment bank last year despite a fall in revenue and profit, adding to pressure for him to clarify his plans for the unit.

In other words, the terminal brain drain has begun. And to think it was only a month ago when we reported that 481 Barclays employees were paid over £1 million, a 53% increase from 2012, in order to prevent just this kind of mass exodus. It looks like it failed.

BBC has more:

Barclays' investment bank is in the process of restructuring. The group said in January that it would cut hundreds of investment banking jobs.

 

Barclays is due to give details on Thursday about its restructuring plan.

 

"This plan will address issues underlying the performance challenges we have recently experienced, including positioning the investment bank for the new operating and regulatory environment," Mr Jenkins said.

 

Barclays warned in April that its currencies, bonds and commodities business would have a fall in profits in the first quarter.

 

Nevertheless, Barclays shareholders voted to approve the group's remuneration package, which includes higher bonuses.

And well deserved it was - surely such abysmal performance must be rewarded with the record-est bonuses ever!