Barclays shrinks investment bank

Barclays is still struggling with their investment banking arms following another round of disappointing results.

The latest results from Britain's banks have triggered the usual row over bonuses and yet more "one-off" charges for various scandals but also some good news.

Lloyds managed a pre-tax profit of £1.8bn last year and announced its first dividend since its £20bn state bailout in 2008. Barclays saw a 12% increase in underlying profits to £5.5bn last year.

However, after a £750m provision for possible fines relating to forex-market rigging, and other one-off costs, the bank registered a small net loss. And both Barclays and RBS are still struggling with their investment banking arms.

What the commentators said

"Financially, Jenkins is justified in saying the bank is healthier than it has been since the crisis." But pay per banker in the investment bank division has risen now that 200 staff have been cut. And the bills for misconduct and alleged fraud "just keep on rising".

Only more cuts will ensure that the investment bank produces returns to beat its cost of capital, said Allister Heath. This means Barclays has reached a "turning point". For the past 31 years, it has "consumed a vast amount of capital" trying to build a world-class investment bank.

But despite "coming tantalisingly close", it hasn't succeeded in building a viable alternative to Goldman Sachs or JP Morgan. RBS is also finding it too expensive, added The Guardian's Jill Treanor, so it's now slimming down to a presence in 13 countries from 51 in 2009.

There will come a time, warned Chirantan Barua of Bernstein, when "we need liquidity in this country and we won't have a British broker-dealer".

Recommended

Three dividend stocks from the dynamic Asia/Pacific region
Share tips

Three dividend stocks from the dynamic Asia/Pacific region

Professional investor Sat Duhra of the Henderson Far East Income investment trust highlights three of his favourite stocks.
18 Oct 2021
Share tips of the week – 15 October
Share tips

Share tips of the week – 15 October

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
15 Oct 2021
Trading: stash the family cash in this cheap wealth management firm
Trading

Trading: stash the family cash in this cheap wealth management firm

Wealth management is a growth market. Rathbone Brothers should be a prime beneficiary – and looks cheap. Matthew Partridge explains the best way to pl…
12 Oct 2021
What the best-performing investment trusts of the past 20 years can teach us
Investment trusts

What the best-performing investment trusts of the past 20 years can teach us

Forty-two trusts have risen more than tenfold over the last two decades. What made the winners stand out? And how can we identify future outperformers…
12 Oct 2021

Most Popular

How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021
Why the world’s most important economic data release has unnerved markets
US Economy

Why the world’s most important economic data release has unnerved markets

The US added only 194,000 jobs in September, far shorter than the 500,000 that were expected. John Stepek explains why markets didn't react as they no…
11 Oct 2021