Barclays’ Q1 profit down on restructuring charge

Reuters and AP, LONDON and BASEL, Switzerland

Thu, Apr 25, 2013 - Page 15

British bank Barclays PLC has reported that its first-quarter profit fell a quarter from a year earlier, as a hefty bill for the cost of a restructuring plan by its new chief executive offset a solid performance by its investment bank.

The bank’s adjusted pretax profit for the three months through last month dropped to £1.79 billion (US$2.7 billion) from £2.4 billion the previous year, just below a mean forecast of £1.85 billion made by analysts polled by the company.

Profits were dented by a £514 million charge to cover costs associated with “Project Transform” — CEO Antony Jenkins’ plan to axe 3,700 jobs, prune the investment bank and reform the bank’s culture after a series of scandals.

The bank said it expects another £500 million of charges related to the restructuring this year.

Jenkins is attempting to distance Britain’s third-biggest bank from the aggressive, high-risk culture championed by his predecessor, Bob Diamond, who left in July last year after Barclays was fined US$450 million for rigging LIBOR interest rates.

Most of the costs incurred so far were in its European operations, where it has cut almost 2,000 jobs, and the investment bank, where it is axing 1,800.

The investment bank made a profit of £1.3 billion in the first quarter, an annual rise of 11 percent that accounted for almost three-quarters of the group’s profit.

Investment bank income rose 1 percent from the same quarter last year to £3.5 billion, higher than the £3.3 billion expected by analysts, as growth in equities and advisory income offset a fall in fixed income, currency and commodities income.

The bank said the good start to the year had continued into the second quarter across its businesses.

Separately, Swiss bank Credit Suisse Group has reported first quarter profit of SF1.3 billion (US$1.37 billion), a sharp rebound from the same period a year ago.

Switzerland’s second-biggest bank credited “positive momentum’’ from a transformed business model for its jump in net profits attributable to shareholders during the first three months, up from SF44 million in the first quarter of last year when it took big charges on debts and paid out higher bonuses.

The Zurich-based bank yesterday said that results for the period between January and last month showed “high returns, strong client franchises, reduced cost base and lower risk-weighted assets.’’

Meanwhile, the planned sale of 630 UK bank branches by Lloyds Banking Group PLC to The Co-Operative Group Ltd has fallen through, leaving state-backed Lloyds to pursue a flotation of the business.

The Co-Op yesterday said it had pulled out of the deal due to tough regulator requirements and the worsening outlook for UK economic growth.

Lloyds said it now intended to sell the network, known as “Verde,” through an initial public offering. However, a flotation is unlikely to be possible until the second half of next year, sources have said.