By Simon Clark 

LONDON -- Barclays PLC said the trading unit in its investment bank generated record quarterly revenue, helping to stabilize the U.K. lender as the coronavirus pandemic caused profit to fall and provisions for bad loans to rise.

The strong trading performance buttresses Barclays Chief Executive Jes Staley's universal banking strategy. He has been under pressure from activist investor Edward Bramson, whose firm Sherborne Investors has said it wants Barclays to shrink its investment bank and become a more narrowly focused consumer bank.

Mr. Staley said the results demonstrate the value of diversification. "We want to make sure this bank is positioned to allow for the recovery and to be a firewall as we face the economic challenges brought on by the pandemic," he said.

Sherborne Investors didn't immediately respond to a request for comment.

Shares in Barclays were trading about 7% higher by around noon in London.

Revenue from the markets unit, which trades fixed-income securities, equities and derivatives, soared 77% to GBP2.42 billion ($3 billion) in the first three months of the year compared with the same period last year. Revenue at the U.K. unit that Sherborne has called for the bank to focus on fell 4% to GBP1.7 billion in the first quarter. Sherborne has said it holds the largest stake in Barclays, with 5.8%.

Net profit at Barclays dropped 42% to GBP605 million as the London-based bank set aside GBP2.1 billion in provisions for losses from loans affected by the pandemic. Provisions for bad loans in the first quarter of last year totaled GBP448 million.

"The charge was funded in part by a stellar performance in markets," Jefferies analyst Joseph Dickerson wrote in a note to investors, referring to the charge for bad-loan provisions.

Banks across the world are increasing provisions to account for the impact of the virus on companies and the economy. The largest U.S. banks have taken billions of dollars in new credit provisions. HSBC Holdings PLC, Europe's biggest bank by assets, set aside $3 billion in the first quarter.

Standard Chartered PLC, a London-based bank that earns most of its revenue in Asia and Africa, said Wednesday that it set aside $965 million in the first quarter, more than 10 times as much as a year earlier.

The virus is the latest challenge to banks in Europe, which have been hobbled by low and negative interest rates that have made lending particularly challenging.

Economic conditions are more difficult than the 2008 global financial crisis "by some measure," Mr. Staley said. "Given the uncertainty around the developing economic downturn and low interest rate environment, 2020 is expected to be challenging."

To help customers, Barclays said it approved 238,000 mortgage and loan payment holidays, and six million clients are paying no personal overdraft or business banking charges. Those decisions will affect earnings in the next quarter, Tushar Morzaria, the bank's chief financial officer, told journalists.

"You'll see the full effect of that come through in the second quarter, so there will be some sort of downward pressure, particularly in our consumer businesses," Mr. Morzaria said.

By contrast, the prospects for the trading unit remain strong, he said.

"Our trading revenues are running well ahead of where we were in the second quarter of last year," Mr. Morzaria said.

Mr. Bramson's Sherborne has also strongly criticized Mr. Staley for his professional relationship with the late financier and convicted sex offender Jeffrey Epstein.

In March, Sherborne called on Barclays to withdraw its support for its American CEO, who is up for re-election at the bank's annual meeting. Sherborne said it would vote against him.

Then on April 16, Sherborne said that "with great reluctance" it will now only withhold its vote on Mr. Staley's re-election because of the challenges the bank faces due to the coronavirus pandemic.

"We continue to believe that Mr. Staley has not demonstrated the level of judgment befitting a director or senior executive of the company," Sherborne said April 16.

The U.K.'s Financial Conduct Authority and Prudential Regulation Authority are examining Mr. Staley's characterization to Barclays of his relationship with Mr. Epstein and the bank's subsequent description of the relationship to regulators, Barclays said in February.

Mr. Staley said Wednesday that he didn't have an update on the regulatory investigation. The investigation is ongoing, an FCA spokesman said.

The Barclays chief said he is focused on steering Barclays through the pandemic and making preparations to reopen the bank's offices across the world. The return will be gradual and social distancing between staff will remain a priority, he said.

The bank's headquarters are located in a skyscraper in London's Canary Wharf financial district.

"How many people can work in this building if you limit the number of people in the elevator to two at a time? It's that sort of calculation which will determine how you roll this out," Mr. Staley said. "I think the notion of putting 7,000 people in a building may be a thing of the past."

Write to Simon Clark at simon.clark@wsj.com

 

(END) Dow Jones Newswires

April 29, 2020 08:25 ET (12:25 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
Barclays (LSE:BARC)
Gráfica de Acción Histórica
De Jul 2020 a Ago 2020 Haga Click aquí para más Gráficas Barclays.
Barclays (LSE:BARC)
Gráfica de Acción Histórica
De Ago 2019 a Ago 2020 Haga Click aquí para más Gráficas Barclays.