Banking giant Barclays has warned it may need to slash costs further this year as it revealed first quarter profits dropped 10%.
The lender reported underlying pre-tax profits of £1.5 billion for the first three months of 2019, down from £1.7 billion a year ago, after suffering a tough quarter for investment banking.
It cautioned that if the “challenging income environment” continues, it may need to reduce costs again to meet financial returns targets.
The group revealed it had cut bonus and compensation payouts across its corporate and investment bank to reflect the division’s poor first quarter performance.
The figures come amid a battle to fend off pressure from New York-based activist investor Edward Bramson, who is leading an aggressive campaign to muscle his way on to the bank’s board.
Mr Bramson – whose investment vehicle Sherborne Investors owns a 5.5% stake in Barclays – has tabled a resolution at the lender’s upcoming annual general meeting (AGM) to be appointed to the board, having called for the lender to curtail its investment arm and increase returns for investors.
The first quarter figures will be watched closely by Mr Bramson as he steps up his offensive ahead of the May 2 AGM.
On a bottom-line basis, the group swung to a £1.5 billion pre-tax profit between January and March, from losses of £236 million a year earlier, when it was hit by around £2 billion of conduct and litigation charges.
Shares fell 2% after the results.
The difficult first quarter for investment banking left underlying pre-tax profits in its international division tumbling 20% to £1.14 billion, with income slumping 6% to £3.6 billion.
The corporate and investment banking business saw a slowdown in trading, but this was partly offset by falling costs as the bank cut bonuses.
Jes Staley, group chief executive of Barclays, said the group had a “weak” quarter for investment banking fees.
But he said the first quarter conditions, that also hit many of the bank’s Wall Street counterparts, may improve as the year plays out.
He added: “What you see in the first quarter is Barclays using this discretion around variable compensation to manage our costs and deliver expected profitability.”
The group’s UK retail banking business saw underlying pre-tax profits edge higher to £588 million from £581 million a year earlier.
Statutory profits jumped to £585 million from £170 million a year earlier, when it booked an extra £400 million to cover charges for payment protection insurance (PPI) mis-selling compensation.
Next week’s AGM is set to be eventful for Barclays, with pay plans for top bosses also in the spotlight.
Two of the biggest influential shareholder advisory groups – Institutional Shareholder Services (ISS) and Pirc – are recommending investors vote down the remuneration report.
ISS said the bank had taken “inadequate” measures to dock Mr Staley’s pay after he attempted to identify a whistleblower, with a 15 million dollar (£11.5 million) fine by US authorities over the matter and personal penalties paid by the bank’s boss.