Slow trading to hit Barclays

BARCLAYS is tomorrow expected to reveal that investment banking income plunged in the third quarter as trading activity declined, though impairments may fall due to an improved outlook in Spain.

Barclays Capital, the investment banking arm led by Bob Diamond, who is due to take over from John Varley as chief executive next year, is expected by analysts to post revenues of around £2.8bn, down around a sixth quarter-on-quarter. That would tie in with the bank’s peers in the UK and US, which have been hit across the board by a slowdown in activity.

But analysts expect impairments to have improved compared to the first half of the year, when the weak property market in Spain caused bad debt charges to rocket. Morgan Stanley forecasts £1.3bn of impairments in the third quarter, compared to a guidance range provided by the bank of between £6.5bn and £6.9bn for the full year.

Compensation is likely to again prove a thorny issue for Barclays, which is expected to set aside around £1.5bn in a compensation pot for its investment bankers in the quarter despite the relatively weaker performance.

The payout – which does not become formalised until the end-of-year results in February – comes after Barclays decided to double the salaries of some of its more senior investment bankers, in order to retain talent by compensating for the regulatory restrictions placed on discretionary bonuses.