New Barclays CEO CS Venkatakrishnan said he is doubling down on the UK bank’s commitment to its investment bank and plans to continue building out areas such as healthcare and technology, prime services and sustainable financing.
Barclays’ corporate and investment bank delivered a fourth-quarter pre-tax profit of £1bn, up 24% from a year earlier, on unchanged revenues of £2.63bn. That took its profit for 2021 to a record £5.85bn, up 46% from 2020, despite a 1% dip in revenues to £12.33bn.
The division’s return on allocated capital last year was 14.9%, up from 9.5% in 2020, and well above the bank’s target of 10%.
Venkatakrishnan took over as CEO in November after the sudden exit of Jes Staley. Venkatakrishnan said on Wednesday CIB’s performance was the result of a multi-year build up and commitment to its investment bank, when it has invested in technology and bankers.
“At the same time, some of our European peers have been exiting capital markets businesses,” he told reporters on a conference call.
“We see opportunities to sustain and grow our share of industry fee pools, helping to protect earnings during weaker periods in the cycle, and delivering strong returns.”
Venkatakrishnan said Barclays is increasing market share in several areas, including equity capital markets, technology banking, prime services, securitised products and emerging markets trading, and will continue to invest in those areas.
“In banking it has been around the new economy, it has been around technology and healthcare, and increasingly it will be around renewables and carbon and the broader ESG agenda.
“In markets, for a number of years we’ve been making investments in our prime business and some of that has paid off very well in the last year or so,” he said.
Black mark lesson
Barclays pulled in £956m in investment banking fees in the October-December quarter, up 27% from a year earlier. Within that, ECM revenues were up 52% to £158m, debt capital markets revenues rose 22% to £511m and M&A advisory was up 24% to £287m.
For the full year, investment banking fees were £3.66bn, up 34% from 2020, with ECM revenues up 72% to £813m, DCM up 13% to £1.93bn and advisory revenues up 64% to £921m. That outperformed an average 40% rise in advisory and underwriting revenues for the big five US banks.
Trading revenues slowed in the fourth quarter, however, and Barclays’ revenues from fixed income, currency and commodities were £546m in the quarter, down 33% from a year earlier. Equities trading revenues fell 8% to £501m – both weaker than the performance of US banks.
Barclays also had a black mark – it took a hefty loss of about US$125m on a complex currency derivatives trade in December, IFR reported last month. It was linked to Advent International and Singapore wealth fund GIC’s abortive takeover attempt of drug maker Swedish Orphan Biovitrum, sources said.
Venkatakrishnan declined to comment on specific trades, but said its investment bank handles "very large risk transfer transactions" for clients across its banking and trading teams.
“The vast majority of times those transactions go very well, they are profitable to us and they give the client a risk and return profile they want. Once in a while, it doesn’t go as well. We are prepared for those things, we obviously don’t like them, but we learn from them and we move on. But they are part of the business of trading and markets," he said.
Barclays warned that group costs could rise “modestly” this year due to inflationary pressures and investment spending.
That includes pay for staff, and there is competition for staff in many areas. Barclays' bonus pot for 2021 swelled to £1.95bn, up 23% from 2020, on the back of the strong performance in the investment bank.
Barclays' group profit was £1.47bn for the fourth quarter, up from £646m a year earlier. Its full-year profit was £8.41bn, up from £3.07bn for 2020, aided by a reversal in credit impairments. Group RoTE jumped to 13.4% from 3.2%, and above its target of 10%.
It raised its total dividend payout for 2021 to 6p per share from 1p for 2020, and said it will buy back up to £1bn of shares, adding to £500m of buybacks during 2021.