Barclays’ profits are hurt by the drop in investment banking fees

Barclays’ profits fell 4 percent in the fourth quarter as a decline in fee income at its investment bank offset a strong performance from its consumer credit business, which was boosted by rising interest rates.

Net income fell to £1.04 billion from £1.08 billion in the same period last year, beating analysts’ expectations of £919 million, the British bank said on Wednesday. Revenue rose 12 per cent to £5.8bn, but that was below the median estimate of £6.1bn.

Barclays UK, its earmarked consumer lender, posted 13 per cent higher profits than the same period in 2021. This was due to a rise in personal and commercial banking revenue as the Bank of England hiked rates, which was a value this month of 15% achieved. Annual high of 4 percent.

At the investment bank, fixed income trading rose 79 percent, but that couldn’t offset a 50 percent drop in advisory and capital markets fees, in line with trends for the quarter on Wall Street. As a result, the division’s revenue fell 2 per cent to £2.6 billion.

The bank also added £500m in loan loss provisions in the quarter, which it says reflected “the deteriorating macroeconomic outlook”.

For the full year, net income fell 19 percent to £5 billion in 2022, just above analysts’ expectations of £4.9 billion.

The drop reflected an embarrassing trading blunder that led to the bank accidentally selling $17.7 billion worth of structured finance products it didn’t have approval for. It had to pay $361 million to the US Securities and Exchange Commission and set aside £450 million to compensate investors.

Revenue rose 14 percent to £24.9 billion, slightly below the £25.2 billion that analysts had estimated. The bank achieved a return on tangible equity – a key profitability metric – of 10.4 percent for the year, compared to 13.1 percent in 2021.