Barclays’ credit quality continued to improve during 2011, with the group bad debt charge down by a third to £3.8bn - but tough fourth quarter trading pushed full-year profits below analysts’ expectations. After revealing that the return on equity had slipped to just 6.6 per cent, chief executive Bob Mr Diamond admitted that “we may not be able to deliver” on the 13 per cent return target set for 2013. “Today is not his [Mr Diamond’s] finest hour,” remarked banking analyst Ian Gordon of Investec Securities.
The investment banking unit had an especially rough ride. Pre-tax profit there slumped 32 per cent in 2011 to £2.97bn amidst grim financial market conditions - and despite an 83 per cent cut to the unit’s bad debt charge and a 12 per cent operating expenses fall. The UK retail operation isn’t exactly booming, either. Even though the bad debt charge there fell 35 per cent, divisional pre-tax profit rose just 3 per cent to £1.02bn - largely reflecting a £400m charge for payment protection insurance (PPI) compensation. Barclaycard was hit with a £600m PPI compensation cost, too, and while net interest income rose 2 per cent pre-tax profit here fell 29 per cent to £561m.