Reading between the lines, something bad seems to have happened to Barclays’ fixed income currency and commodities (FICC) trading business. Without saying so explicitly, the prospectus for the bank’s rights issue suggests that revenues for FICC sales and trading at the bank collapsed in July and August.
The relevant paragraph is on page 59 of the link above.
In plain language, it says revenues at Barclays fell by £500m in July and August. It also says that this was entirely to do with the investment bank, within which it was entirely due to the FICC business. Barclays didn’t return a request for comment.
How Barclays’ FICC revenues fell off a cliff
In the third quarter of 2012, revenues at Barclays’ FICC business were £1,674m. A fall of £500m in July and August implies that revenues in the third quarter of 2013 could be as low as £1,174m (unless September is exceptional, which doesn’t appear to be the case). – That’s a drop of 30% in just one year. Worse, in the third quarter of 2011 revenues at Barclays’ FICC business were £2,254m, making it look like revenues have plummeted 50% in 24 months.
None of this is good news for Barclays’ FICC professionals. When Bob Diamond resigned in July 2012, they lost their champion. New CEO Antony Jenkins has been quick to cut costs and tackle corporate culture, but Jenkins has proven less agile when it comes to outlining a strategy for the investment bank. With FICC revenues in fast decline, that’s a problem – not least because FICC jobs at the bank have been comparatively protected so far.
If FICC revenues are plummeting, broader questions will also be raised about the shape of Barclays’ investment banking business. In June 2011, the then heads of the investment bank Jerry del Missier and Rich Ricci gave a presentation in which they laid down quarterly targets of £900m-£1.2bn each for equities revenues and investment banking revenues. However, in thesecond quarter of 2013, equities revenues at Barclays were £825m and investment banking revenues were just £528m.
Barclays’ investment bank is disappointing expectations in equities and it’s disappointing expectations in IBD. Along with Credit Suisse and Citigroup, Barclays was one of the only banks to be left out of Twitter’s IPO. Now the FICC business is disappointing too. What will Jenkins do next?