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StockBeat: Glasses Half Full at Barclays, Credit Suisse

By Geoffrey Smith -- ‘Diversity is strength’ appears to be the main takeaway from the current quarter of bank earnings in Europe.

The message was driven home again on Thursday by Barclays (NYSE:BCS) and Credit Suisse (SIX:CSGN) Group, both of which reported better-than-expected results for the fourth quarter, albeit the latter’s reports also showed that the benefits of diversification come at a cost too.

The U.K.-based bank became the latest to announce the resumption of shareholder payouts, with a 1 penny cash dividend and a further 4 pence of share buybacks worth a total of 700 million pounds ($974 million).

Together with similar announcements from the likes of BNP Paribas (OTC:BNPQY), Unicredit (MI:CRDI) and Santander (MC:SAN) over recent weeks, that shows that the fog of Covid is gradually lifting, even though the slow pace of vaccine rollouts in the Eurozone mean that recovery there will be delayed by three months or more.

Credit Suisse’s results were - as always - more idiosyncratic, a comment on its own ability to get itself into and out of trouble. The bank swung to a fourth-quarter loss of 353 million Swiss francs thanks to losses on a New York hedge fund and a whopping 757 million litigation charge for past misconduct. Strong performances in markets and in the key wealth management division helped rescue the quarter.

As with Barclays, the numbers were generally better than expectations, despite falling short of year-earlier comparisons. And as with Barclays, Credit Suisse did well in 2020 by hanging on to its investment banking division, whose trading and syndication performance helped offset the dismal performance of retail and commercial banking in a world of low or sub-zero interest rates.

Barclays’ investment bank revenue rose 22% last year, its best performance in six years, on the back of sustained high levels of volatility in markets. Shareholders will be relieved that they resisted the campaign by activist investor Edward Bramson (generously funded by Barclays’ rivals on Wall Street) for Barclays to ditch an arm that has provided a vital source of profit in an extraordinary year.

For sure, Barclays and Credit Suisse won’t be able to count on rivals continuing to pull out of investment banking at the same pace as they have in recent years. But even so, Barclays CEO Jes Staley was confident enough to push back against suggestions that the returns are likely to prove volatile.

Global capital markets have doubled in size in the last decade, creating a larger pool of activity, he told Bloomberg TV.

“There will be more consistency to the investment banking results than some people might speculate,” Staley said.

Barclays (LON:BARC) shares in London were still down 3.4% in London by mid-morning, while Credit Suisse (SIX:CSGN) shares were down 1.1% amid broad declines in European markets.

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