Profit at Barclays' investment bank almost halved in the first quarter after a slump in income at its rates and currency business.
Pre-tax profit at the investment bank dropped 49% to £668m in the first three months of the year because of what the bank described as difficult trading conditions and cuts to the business. The investment bank's return on equity also slumped to 4.7% from 10.7% a year earlier.
Poor performance at the investment bank dragged Barclays' adjusted pretax profit down 5% to £1.69bn. Profit from retail banking rose 20% to £360m, Barclays said in a trading update.
The bank said: "We continue to be cautious about the trading environment in which we operate and as a consequence we remain focused on structurally reducing the cost base in order to improve returns."
Barclays' investment bank has traditionally been its profit powerhouse and the business expanded when Barclays bought Lehman Brothers' US operations in 2008. But a regulatory clampdown has increased the cost of doing business and Barclays angered shareholders by increasing bonuses for investment bankers despite falling profits last year.
The first quarter figures were announced two days before the bank unveils its latest strategic review. Chief executive Antony Jenkins is under pressure to set out how he will manage the investment bank after appearing to give in to threats of mass departures by handing out higher bonuses.
Last week, Skip McGee, the most senior banker left from the Lehman takeover, quit the bank and its head of mergers and acquisitions, Paul Parker, is also reported to have departed.
Jenkins took over after Bob Diamond was forced out in the wake of the Libor scandal. He has been under pressure to rein in the investment bank but he justified the bonus increases by saying the bank faced a "death spiral" if bankers carried out their threats to leave.
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