By Sinead Cruise and Iain Withers
LONDON (Reuters) – Investment banks are set to experience a revenue shake-up next year, with a rebound in banking and advisory fees expected to soften the blow from lower trading revenue, Barclays’ chief executive said. , CS Venkatakrishnan, at an investor event. Tuesday.
A surge in trading helped investment banks report strong results this year and helped offset a disastrous year for fees on IPOs and M&A deals amid turbulent global markets .
That could change by the second half of next year, the Barclays CEO said.
“Commercial revenue pools will probably shrink a bit and investment banking revenue pools will probably increase. I don’t know if they’re offsetting each other,” said Venkatakrishnan – known internally at Barclays as Venkat. — at a Bank of America event.
“But I do expect market volatility to continue at least through the first and second quarters of next year. And so the drop in seasonally adjusted trading revenue is more likely to happen in the second half of the year. ‘next year.”
Venkat said a wave of interest rate hikes in Britain – Barclays’ home market – with another expected hike from the Bank of England this week, would eventually cool the economy.
But he said he still expected the rate hikes to be “a net positive” for Barclays as they boost lending income. He said he expected the bank’s three main business units to exceed 10% return on tangible equity – a key measure of bank profitability – next year.
The UK government’s plan to cap energy prices to help people facing tight household budgets would help the economy, but Barclays is more cautious about the country’s outlook than the US, Venkat said.
“I think the US economy is showing fewer signs of weakness,” he added.
Venkat also provided an update on an error that led the bank to oversell a range of complex financial instruments in violation of US rules.
The bank will provide more details on the final costs of its so-called termination offer to repurchase the securities in “a relatively short order”, Venkat said.
Barclays said last week that investors had submitted claims for $7 billion out of $17.7 billion in securities mistakenly sold, under the terms of the cancellation offer under which the bank was to repurchase the notes and indemnify the buyers.
(Reporting by Sinead Cruise and Iain Withers, editing by Jane Merriman)