Barclays reported a 12 per cent fall in first-quarter profit on Thursday (Apr 25), as a squeeze on UK mortgage pricing, lower income from trading and a drought of mergers and acquisitions fees showed the difficulties it will face in delivering its first strategic revamp in a decade.

The British bank reported pre-tax profit for the January to March period of £2.3 billion (S$3.9 billion), down from £2.6 billion a year ago and in line with the £2.2 billion average of analysts’ forecasts as compiled by the bank.

Barclays is bidding to restore investor faith in its universal banking business model, after years of share price underperformance, clashes with activists over the role of its investment bank, and management turnover.

The British bank said in a long-awaited strategy review on Feb 20 it would invest in its high-returning domestic banking business, as well as axe £2 billion of costs and ramp up payouts to shareholders.

Total income in its investment bank fell 7 per cent, shy of expectations, as a strong performance in equities was more than offset by lower fixed income trading performance and weaker merger advisory fees.

Rival Deutsche Bank meanwhile posted a better-than-expected 10 per cent increase in Q1 profit, citing a bounce back in fixed income trading and dealmaking revenue at its investment banking division.

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The British bank also said it had on Wednesday announced its Irish unit, which houses much of its European business, would sell an Italian retail mortgage book, in line with aims to simplify its exposures.

The deal will conclude in Q2 of this year, generate a pre-tax loss of around £225 million and be neutral to the bank’s capital levels, Barclays said. REUTERS