After the set-to at Barclays’ AGM a couple of weeks ago, we were keenly aware this day would come: now the bank has posted first quarter results showing adjusted profit before tax dropped 5% to £1.7bn in the three months to the end of March, while its net operating income dropped 13% to £6.1bn.
It isn't an easy time for chief executive Antony Jenkins: not only has there been a rash of senior departures over the past few weeks (current investment banking chairman Ros Stephenson announced her departure last week - she was replacing Hans-Joerg Rudloff, who retired in February UBS. Last week co-head of securities Larry Wiseneck announced he's leaving at the end of June, and there are rumours M&A boss Paul Parker's departure is imminent).
The finger of blame was pointed firmly in the direction of Barclays’ investment bank: income dropped a whopping 28%, primarily because of a ‘significant decline’ (of 41%) in its fixed income, currency and commodities arm, which is in charge of trading bonds and foreign exchange. The bank said incomes had been hit by ‘lower client volumes, changes in business mix in light of the ongoing strategic review of the investment bank, and a relative strong performance in Q1 13’ - ie. it has a tough record to live up to.
The investment bank is currently under review, and that’s significant: investment banks have become rather unfashionable since ‘Diamond Bob’ Diamond – an investment banking stalwart – was ushered out of the CEO’s chair, hence the likes of TSB, which proudly proclaims it is retail-only. But (Libor allegations notwithstanding), Barclays’ investment arm is regarded among City-types as an exemplary version of such a bank.
Yet it hasn’t come out of the downturn – and the increased scrutiny that created – unscathed. In January it announced hundreds of job cuts, and in April it warned its FICC business would drop in the first quarter.
Shareholders are likely to be understandably upset about the whole business, particularly considering chief executive Antony Jenkins and chairman David Walker spent a good hour two weeks ago trying to persuade shareholders to vote in favour of a motion to hike its 2013 bonus pool 10%.
In the end, their plans were passed with two thirds of the vote – although the episode was not without its embarrassments. Most notably Standard Life governance director Alison Kennedy standing up and telling them the institution had voted against the plans because ‘the 2013 bonus pool was [not] in the interests of shareholders, particularly when we consider how the bank’s profits are divided among employees, shareholders and ongoing investments in the business’. For an institutional investor to criticise one of its investments in public suggests this is more than just a minor disagreement.
Which suggests that although times are a-changing at Barclays, it’s got a lot more to do before shareholders are entirely convinced.