Torrid 2017 ends on mixed note for Barclays

While Barclays's torrid 2017 ended on a mixed note, chief executive Jes Staley sees better things to come.

The investment bank’s income from dealing stocks, bonds and currencies fell 18 per cent, according to its fourth-quarter earnings report Thursday, still a better performance than the average 25 per cent drop in markets revenue across Wall Street firms in the final three months of the year. The bank also said it would increase its dividend this year and would consider buying back shares.

“We are pleased with the start to the year, and in particular in the markets businesses,” Mr Staley, who has been chief executive officer since 2015, said in the earnings statement.

Barclays took a £240 million(€271 million) charge for litigation related to foreign-exchange manipulation, one of the scandals that Mr Staley is trying to put behind the bank. He also embroiled himself in a scandal over whistle-blowing last year and the bank was charged with fraud by UK regulators, and the shares fell while other banks rose. The chief executive has staked his reputation on turning around the securities unit, which even after years of restructuring is still the firm's worst-performing division.

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Bonus Pool

The bonus pool across the firm fell 2 per cent to £1.5 billion for the year. The front-office bonus pool for the corporate and investment bank fell 1.2 per cent to £864 million.

Compensating the best-performing traders and dealmakers while culling others is part of Mr Staley’s plan to build a bulge-bracket investment bank capable of competing with the biggest players on Wall Street. In a gamble to boost returns, Mr Staley has authorised a plan to reallocate capital from plain-vanilla lending to higher-risk trading and exotic products, activities the bank has shunned since the financial crisis.

Pretax profit, excluding litigation costs, rose slightly to £334 million, missing the average £570 million average estimate of 14 analysts compiled by the bank. Net operating income was about £4.45 billion, almost unchanged from a year earlier.

The dividend boost, which will restore the payout that Staley cut in half in March 2016, is a sign executives are confident the bank’s slimmed-down balance sheet has enough capital to survive another crisis and pay its remaining misconduct fines. Staley had cut the payout to absorb losses from an accelerated run-down of a unit that housed toxic or unwanted assets.

Stock Drop

Barclays stock has dropped 13 per cent since Mr Staley took over in December 2015, compared with an 18 per cent gain by the UK’s FTSE 100 bank index.

Barclays didn't provide updates on the three major legal cases it faces on both sides of the Atlantic. The bank is back in discussions with the US Justice Department over a multi-billion-dollar penalty for selling toxic mortgage-backed securities before the financial crisis, after initially failing to settle and being sued in December 2016.

In the UK, the Serious Fraud Office has charged the bank with conspiracy to commit fraud during its 2008 capital raising from Qatar, and last week added a charge of “unlawful financial assistance” at the holding-company level, a move that could have implications for Barclays’s ability to operate around the world if found guilty. - Bloomberg