Costs are overshooting and revenues are undershooting at Barclays Capital, but few people are losing their jobs
Costs are overshooting and revenues are undershooting at Barclays Capital, but few people are losing their jobs
Today is Barclays Results day.
Ostensibly, BarCap did well. Revenues excluding DVA were down 12% year-on-year in the first nine months. Excluding DVA, profit before tax was down 20%. Fixed income revenues were down the merest 20%; equities and advisory revenues were up 2% and 0.2% respectively.
Actually, BarCap's 'growth businesses' look a little lacklustre
BarCap's sales and trading results look solid compared to the likes of Citi, BAML and Goldman, where performance year to date has been less impressive (FICC revenues fell 37% year-on-year at Goldman, for example). However, BarCap's crowing about its advisory business looks a little premature.
In today's call, the bank said it's especially proud about the US investment banking operations it inherited from Lehman. And yet for a business area that's meant to be growing on the back of big recent investment, BarCap's advisory revenues look insipid: their 0.2% year-on-year increase in the nine months to September compares to a 9% increase at JPMorgan, a 10% increase at BAML, and a 6% increase at Goldman Sachs.
It's also worth noting that BarCap's stated aim has been to make 3.7bn in overall revenues per quarter and yet it's only ever achieved that once: in the first quarter of 2010. In the past quarter, it made 2.3bn, excluding the gain from its own credit.
Costs are now substantially above their target
BarCap aims for a cost to revenue ratio of no more than 65%. However, in the second quarter, when DVA was excluded, costs were 78% of revenues. Year to date, the cost/revenue ratio is running at 68%.
This does not imply that a big round of redundancies is coming soon. The bank said this morning that there are "no big announcements" coming regarding headcount and that while it intends to abide by the 65% target as closely as possible, this is the target in a normalized environment only (2011 not being normal).
