(Bloomberg) -- Barclays Plc posted first-quarter profits that topped analyst estimates after its stock traders collected a surprise windfall from tumultuous global markets. 

Revenue tied to the British bank’s global markets business slipped to £2.3 billion ($2.87 billion) in the first quarter. While that was an 8% drop from a year earlier, it topped the £2.19 billion average of analyst estimates compiled by Bloomberg. 

The division’s results buoyed pretax profits, which also bested expectations. They were helped by a 25% surge in equities trading revenue, which was enough to offset lower-than-expected results from its larger fixed income markets division.

Barclays’s shares soared 4.4% in London. The stock has climbed 24% this year, outpacing the 8.5% advance of the FTSE All-Share Banks Index.

“On equities we’ve done extremely well,” CEO C.S. Venkatakrishnan said in an interview from the stock trading floor with Bloomberg Television. “Securitized products has done very well, on the rates side in Europe we’re a little weaker.”


The results follow a strategy update earlier this year by Venkatakrishnan, where he redesigned Barclays’s business structure and set more ambitious financial targets in a wide-ranging investor presentation. The CEO and his chairman Nigel Higgins have come under increasing pressure from investors as Barclays struggles with mediocre returns and a lagging share price. 

Wall Street Businesses

The subdued quarter from Barclays’s fixed income business stood in contrast to Deutsche Bank AG’s traders, who delivered a 7% jump in the first quarter, more than analysts had expected.

“In global markets, we did not capture market opportunities to the same extent as some of our competitors did,” Venkatakrishnan said on a conference call with journalists.  

But revenue tied to Barclays’s investment banking businesses also topped estimates, aided by a 18% surge in debt capital markets fees. Overall, the better-than-expected Wall Street results echo a similar showing from Barclays’s US rivals earlier this month.   

Barclays sees itself as Europe’s last-remaining global investment bank and has pledged to use that unique position to boost its return on tangible equity to 10% this year and to 12% by 2026. That metric stood at 12.3% for the first quarter. 

Barclays’s advisory business continued to suffer from the industrywide slump in merger activity. Dealmaking revenue slid 30% to £148 million, compared with the £166 million average of analyst estimates compiled by Bloomberg.

Tensions have been running high in the investment banking division since Cathal Deasy and Taylor Wright took the reins of the unit last year and their ascension sparked a period of higher-than-usual attrition. More recently, the division has been reeling from a grim bonus season in which Barclays handed dozens of investment bankers no bonus at all.

Retail Strength

With its recent overhaul, Barclays reorganized into five new divisions: its UK retail bank, a UK corporate bank, a private bank and wealth management arm, an investment banking division and a US consumer bank.

The company is now focused on growing in its home market. To accelerate that pivot, Barclays announced it would acquire much of Tesco Plc’s banking business earlier this year. 

As part of the investor update earlier this year, executives also pledged to return £10 billion to shareholders over that time. The company won’t consider further acquisitions that would jeopardize those distribution plans, according to Anna Cross, the bank’s finance director. 

“We’ve done some small acquisitions along the way,” Cross said in the conference call with journalists. “We will continue to consider small capabilities within our high returning business but never at the expense of our distribution plans to the shareholder.”

Barclays UK — the lender’s retail unit focused on its home country — posted revenue of £1.83 billion, which topped expectations. It was helped by the company’s structural hedge program, a balance sheet exercise the lender uses to protect against interest rate movements and also lower impairments. 

  • Total income from the structural hedge was £1.1 billion in the quarter
  • The company has offloaded a portfolio of performing Italian retail mortgages and is in discussions to sell non-performing portfolios of Swiss-Franc linked Italian retail mortgage
  • Net interest income in the Barclays UK unit slipped 4% as Barclays faced continued pressure from savers moving their money into higher-rate alternatives

--With assistance from Anna Edwards, Guy Johnson and Kriti Gupta.

(Updates with additional information in second paragraph, quotes from media call in eighth.)

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