Now Barclays, as everyone knows, is a complicated bank. That’s why Diamond Bob gets paid so much (although he’s generously agreed to accept a smaller bonus if he misses all the targets he’s supposed to hit to earn it). You might think that banking means taking in deposits and lending them to borrowers who look likely to repay. How old-fashioned. True, Bob places great emphasis on serving customers and clients (and please don’t mention PPI mis-selling or listen to those simple souls who confuse Barclays’ tax “planning” services with illegal tax evasion) but Barclays has left all that far behind.

So how’s the Bank of Bob doing? Tomorrow brings what promises to be a rough old annual meeting, so today it cleared the financial decks, reporting an adjusted profit of £2.445 billion and a statutory loss of £475 million for the first quarter. The bulk of the difference is the accounting absurdity of valuing its own debt. If investors worry about a bank’s future, the market value of its debt falls. The mark-to-market rules allow the bank to book this fall as a profit, thus making the figures look better, and (theoretically) reducing the likelihood of the bank failing. When Mr Market subsequently believes its survival is more likely, the price of the debt rises, and the bank has to book that as a loss. As Barclays’ prospects have improved, that effect created a “loss” of £2.6 billion.

This is merely modern banking 1.01. Barclays’ numbers include a nifty £200 million profit from unwinding a hedge on a staff share scheme. Of course. Doesn’t everyone hedge against the possibility that a staff share scheme would actually pay out? And do the hedge traders plant their own hedges, or are the gardeners from a sort of reverse-hedge department, betting on their colleagues’ incompetence? In fact, Barclays’ boys are merely in the nursery on this. The blooming practitioners are at Credit Suisse, as Dealbreaker has noted. Here’s a taster:

We have purchased protection on the senior layer to hedge against the potential for future counterparty credit spread volatility. This was executed through a CDS, accounted for at fair value, with a third-party entity. We also have a credit support facility with this entity that requires us to provide funding to it in certain circumstances.

If you can understand what’s going on here, you’re probably already working at the Swiss bank – or Barclays.The rest of us might think that modern banking is designed to bamboozle, and to ensure that those at the top continue to get paid obscene sums far beyond any real value they create. Say it ain’t so, Bob.

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