Barclays CEO Jes Staley struck a bullish tone yesterday, insisting his investment banking division was on the up.
Third quarter profits jumped to £1.5bn, up from £1.1bn a year ago. If this puts a spring in Staley's step, there are plenty of items in his in-tray to pull him back down to earth – not least an upcoming meeting with activist investor Ed Bramson, who wants to engineer a move away from investment banking.
Tackling this head-on, Staley yesterday cited his bank's involvement in the three juiciest deals of the year: Comcast's swoop on Sky, Michael Kors' move on Versace and Rangold's merger with Barrick. “Four quarters in a row we have gained market share,” Staley said, adding “the reality of what is happening belies the proposition that we can't compete.”
Bramson's intentions are no secret, though according to Staley he has “yet to articulate his strategy.” Bramson may take that as an invitation to step up his manoeuvres when he meets Staley and Co. in a few weeks time.
Analysts, meanwhile, are keeping Barclays on a watching brief. Laith Khalaf says the bank still faces challenges and yesterday's results “don't really change the big picture.” Others note the hefty fine paid over mis-selling products ahead of the financial crisis. Legacy issues aren't yet in the rear view mirror. PPI claims continue to soak up cash, and Richard Hunter of Interactive Investor points out “the phrase 'excluding litigation and conduct' is peppered throughout the [results] statement.” A Serious Fraud Office probe still hangs over the bank, leading Khalaf to conclude that progress at the bank “comes in fits and starts.”
Barclays is far from alone in facing the headwinds, and ahead of next week's budget chancellor Philip Hammond may wish to consider ways in which he could make life in the UK a little easier for the banking giants.
Any such move would hardly be a vote winner, but as EY's Neil Harrison observed yesterday, George Osborne's bank and building society levy (which imposes an eight per cent additional charge on profits) makes the UK “less attractive for financial services…and reduced the amount banks can lend to stimulate growth.” Governments rarely turn off a tax tap once it's ben turned on, but now would be a good time to reassess this levy.