Barclays Bank posted its full-year 2013 financials yesterday. For the year, the bank reported profit before taxes of £5.167 billion, a 32% decline from 2012. Included in the numbers, Barclays broke down figures for its Investment Banking (IB) and Fixed Income Currencies and Commodities (FICC) divisions. For the year, IB operating income dropped 9% to £10.7 billion, with before tax profits of £2.5 billion which was 37% below 2012 levels. Within IB, FICC operating income also dropped 17% from 2012 to £5.537 billion.
During their conference call, Barclays indicated that income from its FX unit grew during the year, despite the overall declines. The unit was mentioned alongside that of their transactional business in rates, credit and equities, which they cited as providing its IB unit greater income diversity than before the 2008/09 global financial crisis.
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Included within the bank’s analyst call was their deleveraging initiative which could directly affect Barclays’ FX division. As mentioned in the call and in their presentation slide deck, the bank is actively engaged in deleveraging its exposure. In this regard, their leverage ratio has risen to 2.97% at the end of year from 2.18% at June 2013. The company stated its goal to reach, and maintain a consistent ration of between 3.5-4.0% by 2015. As such, among asset types where Barclays was and is expected to be in the future, is to reduce exposure in derivatives and loans.
In terms of potential profits, the deleveraging taking place in the firm’s proprietary trading and lending activity will be expected to cause Barclays to focus more of its energy in growing its banking and transactional businesses. One area which should continue to see more attention is the bank’s FX division which had been mentioned as an area of growth for 2013. In addition to profit growth, within their conference call comments, Tushar Morzaria, Barclays, Group Finance Director and Executive Director, also alluded to market share gains taking place in FX. As such, for 2014 and through the firm’s deleveraging initiative, Barclays may be inclined to continue to try and increase the momentum of its low margin, but active FX dealing business.