Barclays PLC, the third-largest bank in the UK by assets, fell the most in 12 weeks after investment banking revenue dropped more than expected in the first quarter.
Revenue at the Barclays Capital unit slumped 26 percent to £3.8 billion (US$5.8 billion) for the three months to March 31, missing the £4.9 billion estimate of analyst Mark Phin at Keefe, Bruyette & Woods Ltd. The shares declined the most since Feb. 4.
“We are skeptical about continued growth at Barclays Capital,” wrote Bruce Packard, an analyst at Seymour Pierce in London, who has a “sell” rating on the stock.
Fixed-income bankers “have worked hard to perpetuate the scientific nonsense of everlasting, compounding growth.”
Barclays Capital, the investment banking unit led by Robert Diamond, hired more than 750 people in Europe and Asia last year, adding equities and mergers and acquisitions advisers, after buying the North American unit of Lehman Brothers Holdings in 2008.
Banks including JPMorgan Chase & Co, Citigroup Inc and Deutsche Bank AG this month posted increased profit for the quarter, aided by fixed-income trading revenue.
First-quarter net income rose to £1.07 billion, or £0.087 a share, from £826 million, or £0.068, in the same period last year, the company said in a statement.
“In the next nine months, we would expect to see new businesses coming on stream,” Barclays Capital president Jerry Del Missier said in a telephone interview, pointing to cash equities and credit business.
“Everyone is focusing on the revenue figure, it’s a disappointment,” Oliver Gilvarry, head of research at Dolmen Securities in Dublin, said by telephone. “The market got ahead of itself on what it was expecting on the revenue side.”
Barclays said impairments fell 35 percent to £1.5 billion compared with the same period a year earlier and down 19 percent from the fourth quarter of last year.
Pretax profit at Barclays Capital outstripped the performance of every other division, rising 62 percent to £1.47 billion in the first quarter compared with the same period last year.
That resulted from a 75 percent fall in impairments and a 66 percent rise in revenue from debt and equity underwriting.
The second-biggest contributor to profit was the global retail banking unit, where pretax profit fell 6 percent to £403 million.
Barclays is accruing 38 percent to 39 percent of revenue in remuneration for employees in its investment bank, finance director Chris Lucas said in a conference call with journalists yesterday. A decision on bonuses won’t be taken until the end of the year, he said.
Barclays Corporate posted a loss of £75 million and the Barclaycard credit card unit’s profit declined 34 percent to £118 million. Profit rose 20 percent at UK consumer banking to £238 million.
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