Barclays gets a boost from star BarCap
BARCLAYS, the UK’s second-largest bank, yesterday revealed a robust third-quarter profit haul and signalled light at the end of the bad debt tunnel, in a sign that the nascent economic recovery is feeding through into the banking sector.
Barclays said pre-tax profit for the third quarter came in at £1.56bn, down from £2.8bn a year ago, though the decline was largely due to losses on the value of its own debt. With those costs stripped out, the bank’s pre-tax profit over the first nine months of the year soared 116 per cent to £4.4bn, while income rose by over a quarter to £23.79bn.
The bank’s results were driven primarily by profits at its star-performing investment banking division, Barclays Capital, which is reaping the reward of acquiring the US business of failed bank Lehman Brothers last year. The division posted a pre-tax profit of £2.7bn for the first nine months of the year, excluding a £1.3bn charge on its own credit.
The group also saw income at its retail and commercial banking arm grow by 11 per cent, though impairments sent pre-tax profit at the division down 30 per cent to £2.2bn.
Barclays, though not so bullish on falling impairments as rival HSBC, said it expects bad debt charges for the full year to come in at around £9bn, at the bottom end of its forecast range. Impairment charges in the first nine months rose 65 per cent on the same period in 2008, to £6.2bn.
Credit Suisse analyst Jonathan Pierce pointed out a concern that cost deferral policies would lead to downward pressure on BarCap’s cost to net income ratio in the future, but said the statement represented “a decent performance with good balance across the divisions”.
He added: “Barclays remains our favourite UK bank.”
The group shied away from providing any details on its remuneration plans, saying only that it would adhere to G20 guidelines on bonuses but would not decide the level of payouts until January.
Shares in Barclays, which along with HSBC escaped having to tap the government for a direct bailout in the crisis, fell five per cent over the day yesterday to 325.5p.
JOHN VARLEY
CHIEF EXECUTIVE OF BARCLAYS
BOB DIAMOND
BARCLAYS PRESIDENT, HEAD OF BARCLAYS CAPITAL
NEWS that Barclays’ head has been thrust clear of the murky waters of the crisis by soaring profits at its investment banking arm will come as no surprise to those in the City familiar with the success story that is Barclays Capital.
BarCap is led by Bob Diamond, who, at 58, has earned his place as one of the world’s most handsomely-paid bankers. Diamond joined the Barclays group in 1996 from Credit Suisse First Boston. He joined the Barclays executive committee a year later and rapidly moved on to take up one of the top jobs in the group as the boss of corporate and investment banking and wealth management.
Having trousered a healthy $20m bonus in 2007 after stellar results at the division, Diamond scored another coup last year with BarCap’s purchase of the US operations of Lehman Brothers, which have already played a large part in the division’s £2.7bn pre-tax profit so far this year.
Since then, he has spent half of his time in New York beefing up the firm’s US profile and has also overseen the build-up of its equities and M&A advisory business in Europe and Asia.