By Lawrence White
LONDON (Reuters) - Barclays (L:BARC) followed its U.S. rivals in reporting falling investment banking revenues in a tough first three months of the year but investors welcomed signs of resilience under new Chief Executive Jes Staley.
The lender also said on Wednesday that it was in discussions to sell its French retail banking operations to AnaCap Financial Partners, as part of efforts to shed "non-core" assets to cut costs and restore profits.
Barclays had already announced plans in March to sell its 62 percent stake in Barclays Africa Group (J:BGAJ) over the next two to three years, leaving the continent to focus on Britain and the United States.
First quarter pretax profits fell to 793 million pounds, below the average forecast of 846 million pounds from analysts polled by the company.
Stripping out a 109 million pound accounting charge for swings in the value of the bank's own debt, pretax profits were 7 percent higher than forecast, partly due to higher than expected income and lower impairments.
"The investment bank performance, looked at on its own, doesn't seem fantastic but with revenues down 11 percent in dollar terms, this is actually very good when compared to peers," said Brian Cullen, fund manager at S.W. Mitchell Capital which holds Barclays shares.
U.S. investment banks last week reported much sharper revenue declines, with Goldman Sachs (N:GS) falling 40 percent year-on-year..
Barclays shares were trading 2.8 percent higher at 178.9 pence at 0855 GMT, pushing the bank to the top of the FTSE 100 (FTSE) gainers.
Barclays had already indicated on Apr. 5 that it expected weak results in investment banking compared to the same period in 2015.
"This is a relatively clean and good set of numbers against low expectations," said analysts at Keefe, Bruyette & Woods in a note published after the earnings.
CORE BUSINESSES
Barclays said core units Barclays UK and Barclays Corporate and International performed strongly, with an aggregate 9.9 percent return on equity, driven by the UK business, which posted a 20.5 percent standalone return.
"The core return of 9.9 percent is very close to the double digits that we have been targeting," Staley, who took over the role last December, told reporters.
Staley's comments came the day after a top Bank of England official warned investors may have to accept lower bank profits than in the past as they shift to less risky models.
Analysts at Bernstein warned of tough times ahead, pointing to the potential for a spike in credit card impairments risk, weak investment banking performance and the uncertainty of disposals that Barclays is betting on to shore up its capital.
Total income at the bank's Consumer, Cards and Payments unit increased 24 percent to 917 million pounds, reflecting continued growth in Barclaycard US and Germany.
Barclays' French unit had 1243 employees and made a loss of 76 million pounds on turnover of 225 million pounds in 2015, according to company data. Barclays said it would keep the investment banking unit of its French business if a deal goes through.
Barclays' common equity Tier 1 (CET1) ratio, a key measure of financial strength, fell to 11.3 percent in the first quarter from 11.4 percent at the end of 2015.