Barclays fails to live up to expectations

BARCLAYS yesterday unveiled a disappointing set of results, prompting its shares to dip 3.26 per cent as investors lost faith in chief executive Bob Diamond’s (pictured) ability to deliver on an ambitious 13-15 per cent returns target.

Pre-tax profit dropped to £1.66bn, nine per cent down on the first-quarter of 2010, with the corporate and investment banking division seeing profits plunge 29 per cent. Barclays Capital (BarCap), the investment banking business, suffered particularly from a 22 per cent drop in revenues in its biggest division, fixed income, currency and commodities (FICC), a trend also seen in its rivals’ results.

Rich Ricci, co-head of BarCap, admitted: “The (FICC) market outlook, I think, is still muted, at least for the near term.” BarCap continued to contribute the lion’s share of the bank’s profits, however, delivering £982m pre-tax – 59 per cent of earnings.

Barclays’ UK retail bank was its largest business to see an improvement in profits, which rose 21 per cent to £288m. The bank credited a better rate of impairments, although the progress was partially offset by losses on the continent.

Impairments rose in Spain, amounting to a £175m charge and the bank took a £190m loss on its Protium line prior to cutting a deal to bring the assets back on balance sheet.

Diamond was keen to highlight a 20 basis point rise in the bank’s core tier one capital ratio to 11 per cent in Basel II terms. Diamond also told shareholders that the effect of proposals from the Independent Commission on Banking (ICB) to ring-fence the capital of retail operations were still not clear but that “Barclays does not use deposits to fund its investment bank”.

However, shareholders are impatient for better returns – the bank saw a significant 9.7 per cent vote against its remuneration report. Shareholder Trevor White said at its annual general meeting yesterday: “I do not believe shareholders are being treated fairly in sharing the pain.”