Barclays’ corporate and investment bank profits last quarter fell 41% from the year before as a jump in fixed-income trading revenue was countered by a slump in advisory and underwriting fees and markdowns on leveraged finance positions.
Barclays said CIB made a pre-tax profit of £560m in the fourth quarter, down from £957m a year before. CIB's revenues of £2.58bn were down 2%, but operating costs rose 15%. For 2022, CIB made a pre-tax profit of £4.31bn, down 23% from the year before. CIB’s annual return on equity fell to 10.2% from 14.3%.
Barclays said it awarded staff bonuses of £1.79bn for 2022, down 8% from £1.95bn in 2021.
Analysts said CIB revenues fell short of expectations and a £500m share buyback was less than expected and underwhelming when compared to distribution plans of many rivals. Barclays shares fell 8% to 172p.
The bank was upbeat on its ability to continue winning market share, however, and said it will invest in hiring staff and in technology and expanding products to do so. It estimated it has increased its share of markets revenues by 114bp since 2019.
“We believe that we can continue to gain sustainable market share in the markets business,” finance director Anna Cross told reporters on a conference call.
“We’ve been investing over the last few years in talent, in systems and technology, and we’ve shown today the impact on financing … you should expect us to continue to invest across the CIB,” Cross said. She said that will include investment banking, notably in growth sectors such as technology and healthcare.
That is despite a grim past year for dealmaking across the industry. Barclays’ advisory and underwriting revenues in Q4 were £480m, down 50% from a year before, including a 75% slump in equity capital markets, a 52% drop in debt capital markets and a 31% fall in advisory.
Offsetting that, revenues from fixed income, currency and commodities hit £976m, up 79% from a year ago and a record for the fourth quarter. Equities revenues dipped 12% to £440m.
Barclays outperformed rivals in FICC and was in line with US peers in equities and investment banking. The five major US banks reported a 28% rise in FICC revenues in Q4 on average, a 10% decline in equities and a 53% fall in investment banking.
Barclays’ performance was aided by movement in the pound versus the US dollar. It said at constant exchange rates Q4 FICC revenues were up 56%, equities revenues were down 23% and investment banking was down 56%.
Levfin markdowns
For 2022, Barclays reported record revenues for FICC of £5.7bn, up 65% from 2021. Equities revenues were up 6% to £3.15bn, and investment banking revenues slumped 39% to £2.22bn. That represented a stronger performance than rivals, again aided by currency moves. US banks reported an average rise of 18% in FICC revenues for 2022, equities revenues were down 4% and investment banking slumped 48%.
But the bank joined rivals in taking some big hits in leveraged finance, where banks have been stuck with loans on M&A deals and nowhere to place it, forcing them to mark down their value. Barclays marked down its leveraged finance positions by about £335m net of hedges last year, including £85m in Q4.
“We have managed down our portfolio exposures by 50% and we’ve taken some marks on those exposures throughout the year,” Cross said, estimating the markdowns were broadly in line with peers and left it “appropriately marked” at the end of the year.
Barclays said financing revenues in FICC and equities were a brighter spot, however, and accounted for £2.9bn of its markets revenues last year, up from £2.2bn in 2021 and representing 16% compound annual growth in the past three years.
Cross said there would be no change in CIB strategy after several changes in top roles in recent weeks, including new co-heads of investment banking and the departure of co-heads of equities, leaving it looking for a new leader for that unit.
Barclays group reported a pre-tax profit for 2022 of £7bn, down 14% from the year before. The results were marred by a £1.6bn conduct and litigation charge, including £966m from a blunder where it issued securities in the US over the limit it was allowed to.
Cross presented the Q4 results, as Barclays CEO CS Venkatakrishnan is undergoing treatment for cancer. The bank said in late November Venkatakrishnan will undergo treatment in New York for 12–16 weeks and work remotely during that time.