U.K. Second Largest Bank Barclays Plc Profit Doubles
Barclays Plc, the U.K.’s second- largest bank, soared in London trading after second-half profit more than doubled, lifted by investment banking and the sale of a fund management unit.
Net income for the six months to Dec. 31 rose to 7.5 billion pounds ($11.8 billion) from 2.66 billion pounds in the year-earlier period, according to Bloomberg calculations based on full-year results posted today. That beat the 6.72 billion- pound estimate of 14 analysts surveyed by Bloomberg. Barclays Chief Executive Officer John Varley and President Robert Diamond declined bonuses for a second year, the bank said. Barclays gained as much as 9.7 percent, the most since April 30.
“This is the first time in three years that we have had really positive news from a British bank,” said Ralph Silva, an analyst at London-based Silva Research Network, which specializes in financial-services firms. “My biggest concern about Barclays is that too much of their profit is coming from one single line of business.”
Most of Barclays’ profit derived from the sale of its Barclays Global Investors unit to BlackRock Inc. in December for a $9.9 billion gain. The investment bank recorded an 89 percent rise in full-year profit to 2.46 billion pounds and declined in all other areas of the group including consumer banking, Barclays said. The London-based lender declined British government capital injections in 2008 and taxpayer-funded asset insurance last year.
Varley, 53, and Diamond “advised the board that they wish to decline” their annual bonuses, the bank said in the statement. Barclays set aside 38 percent of revenue in remuneration for employees at the investment bank, down from 44 percent of revenue in 2008.
“It’s a big message, it is a very smart move politically,” said Florian Esterer, who helps manage about $58 billion at Swisscanto Asset Management in Zurich, in an interview with Bloomberg Television. “I think that takes a lot of pressure off Barclays.”
Trades Union Congress General Secretary Brendan Barber said in a statement that Barclays profit showed “banks win in both good times and bad.” The payment of “huge bonuses when people are still losing their jobs and business cannot get the loans they need because of a crash made in the finance sector goes against every concept of fairness.”
For the full year, bad loan provisions rose to 8.1 billion pounds from 5.4 billion pounds though are expected to decline, the bank said. The lender’s core Tier 1 capital ratio climbed to 10 percent. Barclays Capital absorbed 1.8 billion pounds of credit losses, the bank said.
“We have strengthened our capital position, reduced leverage and added to our liquidity buffer,” Varley said in the statement. “We are, by consequence, both well prepared for any future economic weakness and also able to continue to execute on our strategy as opportunities arise.”
The bank gained 6.2 percent to 292 pence at 11:04 a.m. in London trading for a market value of 33.3 billion pounds.
London-based Barclays fell 15 percent in the three months to yesterday, during which time President Barack Obama demanded that banks curb risk-taking and international regulators at the Basel Committee on Banking Supervision proposed that banks be forced to hold better-quality capital.
Barclays may have to sell half its stake in BlackRock Inc. to plug a 17 billion-pound gap in capital by the end of 2012, Jonathan Pierce, an analyst at Credit Suisse Group AG, wrote to clients last month.
Highest European Profit
Barclays acquired the North American operations of Lehman Brothers Holdings Inc. in 2008. Revenue at Barclays Capital in the fourth quarter was “close to or just below,” the third quarter, Diamond said in an interview. “This year got off to a good start.”
Full year net income rose to 9.39 billion pounds, or 81.6 pence a share, from 4.38 billion pounds, or 57.5 pence, a year earlier, the London-based bank said. Pretax profit so far this year is ahead of the “run rates” of the first half and the full year, the bank said.
Barclays has posted the highest profit among European banks for 2009 so far. Banco Santander SA, Europe’s second-largest bank, posted a $12.3 billion profit for 2009. Deutsche Bank AG, Germany’s biggest lender, posted profit of $6.9 billion.
The bank paid a final dividend of 1.5 pence a share for a full year payment of 2.5 pence a share to investors.