Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Barclays Sees Challenging 2020 Even as Investment Bank Rallies

Published 10/25/2019, 02:27 AM
Updated 10/25/2019, 04:24 AM
Barclays Sees Challenging 2020 Even as Investment Bank Rallies

(Bloomberg) -- Barclays (LON:BARC) Chief Executive Officer Jes Staley warned that low interest rates and Britain’s Brexit-hit economy will make it tougher to meet the bank’s targets next year, even as his traders outperformed most of Wall Street in the third quarter.

“The outlook for next year is unquestionably more challenging now than it appeared a year ago, in particular given the uncertainty around the U.K. economy and the interest rate environment,” Staley said in a statement on Friday. Barclays (LON:BARC) joins other British lenders such as Royal Bank of Scotland (LON:RBS), which has blamed the domestic economic environment for putting its targets at risk.

The corporate and investment bank’s third-quarter total income jumped 17% from the same period last year as revenue from fixed income and equities both advanced, Barclays said in the statement. Barclays outperformed its U.S. peers, whose trading income rose an average of 6.4%, according to Bloomberg calculations.

Barclays aims to boost return on tangible equity, a key measure of profitability, above 9% this year and then raise it past 10% in 2020. While Staley didn’t revise those targets, Citigroup Inc (NYSE:C). analysts have said 7% is a more realistic goal in the near term. To have any hope of meeting the targets, the American-born CEO must maintain a tight grip on expenses.

Staley repeated that Barclays plans to reduce expenses beyond its previous guidance, which had a lower bound of 13.6 billion pounds ($17.5 billion). The CIB unit’s revenue of 2.62 billion pounds beat the 2.42 billion-pound consensus analyst estimate.

According to the bank’s first-half results, Barclays shed about 3,000 jobs in the second quarter and cut variable compensation by more than 20%. Staley’s brake on costs has come at the expense of executive tumult: in a dispute over bonus cuts, he ousted his hand-picked head investment banker, Tim Throsby, and took direct control of the unit last spring.

The stock has lost almost 25% since Staley took the top job in December 2015. That sluggish performance led activist Edward Bramson to launch a campaign against the CEO’s strategy last year, arguing that the bank should redeploy capital from its investment bank to higher-returning businesses like retail banking and credit cards. Bramson has repeatedly said the lender is following a “destructive strategy."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.