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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!

 

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Tue, 05/06/2014 - 08:03 | 4731273 More_sellers_th...
More_sellers_than_buyers's picture

Time to double everyone's bonus....you know ..to retain talent...hahahahahahaha

Tue, 05/06/2014 - 08:07 | 4731277 Sudden Debt
Sudden Debt's picture

yeah... they need more motivation to steal from the account holders...

Tue, 05/06/2014 - 08:07 | 4731278 G_T_A_44
G_T_A_44's picture

No surprise' here. Large Money Centers, both domestic and abroad, remain INSOLVENT! Ready the Beach for Wave II.

Tue, 05/06/2014 - 08:09 | 4731283 PlusTic
PlusTic's picture

the "investment bank" model is toast...

Tue, 05/06/2014 - 08:26 | 4731316 NoDebt
NoDebt's picture

I think you're right.  "Wireline" brokerage (there's an old term!) have been toast for a while now.  Investment Banking, another leg of the table, is being kicked out from under them as well.

Somehow, though, I can't shake the feeling that even if these big banks shrink back to a non-TBTF size, none of us regular people are going to have markets that are any more free or fair.

Still, it's enjoyable to watch the Fed's policies begin to significantly injure those banks it originally "saved".

 

Tue, 05/06/2014 - 08:10 | 4731284 Quinvarius
Quinvarius's picture

Debt is massively overpriced.  Everyone knows FOREX is rigged.  No one wants their paper gold when they can get the real thing.  And no one wants to do business with a stilted bank.  Mystery solved.

Tue, 05/06/2014 - 08:33 | 4731335 negative rates
negative rates's picture

On to the next mystery Einstien.

Tue, 05/06/2014 - 08:14 | 4731288 B2u
B2u's picture

Yellen needs to bail them out...

Tue, 05/06/2014 - 08:15 | 4731289 williambanzai7
williambanzai7's picture

Absolutely heartbreaking...

Tue, 05/06/2014 - 08:34 | 4731338 negative rates
negative rates's picture

Oh it will be, count on that.

Tue, 05/06/2014 - 08:16 | 4731291 youngman
youngman's picture

Most people hate banks..no more loans wanted...so the writing is on the wall...the money is not going to be pouring in from fees...but watch out..they will start stealing and cheating bigtime..just to survive..you think the markets were rigged before...watch these banks set new levels of corruption

Tue, 05/06/2014 - 08:26 | 4731315 Edward1290
Edward1290's picture

''they will start stealing and cheating bigtime..just to survive.''

news flash for you.........they starting stealing in 1913.....the Fed was set up to steal THE NATIONS LABOR THRU THE INTEREST PAYMENT.....thats why they call them 'money-changers...........

Tue, 05/06/2014 - 08:35 | 4731341 negative rates
negative rates's picture

Straight from the conductors mouth too.

Tue, 05/06/2014 - 08:16 | 4731294 Bill of Rights
Bill of Rights's picture

Oklahoma House Passes Bill That Reaffirms Gold and Silver as Money

 

http://blog.tenthamendmentcenter.com/2014/04/oklahoma-house-passes-bill-that-reaffirms-gold-and-silver-as-money/#.U2TfU_YlkkR

 

The bill also provides a state-level tax exemption to Oklahoma residents exchanging their precious metals for another medium of change:''

Tue, 05/06/2014 - 10:34 | 4731509 Cthonic
Cthonic's picture

They used to apply sales tax to bullion coins.  While I didn't read the entire bill, it looks like they are finally rectifying that.  If they keep the language allowing the insertation of gold clauses into contracts,  it'll get killed in a federal court. Moreon this subject in the article below.

http://en.wikipedia.org/wiki/Gold_Clause_Cases

Tue, 05/06/2014 - 09:55 | 4731645 WillyGroper
WillyGroper's picture

They've allowed the state treasurer to invest in gold & silver for years now.

Tue, 05/06/2014 - 08:17 | 4731295 buzzsaw99
buzzsaw99's picture

I like big bone-uses and I can not lie

You other bankers can't deny

That when earnings come in with an itty bitty ebitda

And a round thing in your face

You get sprung, wanna pull out your tough

'Cause you notice that bottom (line) was stuffed...

Tue, 05/06/2014 - 08:38 | 4731347 negative rates
negative rates's picture

Do you suffer from itty bitty titty syndrome, it can make a girl go crazy if not strictly supervised.

Do NOT follow this link or you will be banned from the site!