Barclays' independence pays off

RESULTS: Strip out the profit from selling Barclays Global Investors, and Barclays' pre-tax profit fell 13 per cent in 2009 - but making profits at all in this climate is an achievement.

February 16, 2010

by John Adams

Barclays' bumper figures aren't quite as impressive as they seem. Adjust for a £6.3bn profit from selling wealth manger Barclays Global Investors (BGI), and group's pre-tax profit actually fell 13 per cent to £5.3bn. That's still a decent outcome at a time when those UK lenders that took state help are set to make losses, although the group has not been immune to the recessionary conditions affecting all lenders.

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Indeed, the banking group reported a 49 per cent hike in its bad debt charge to £8bn, and earnings slipped across most areas of the business. The UK retail operation, for instance, saw pre-tax profit tumble 55 per cent in the period to £612m, while the commercial banking unit's profits dropped 41 per cent to £749m, mainly due to a surge in impairment and other credit provisions from £414m to £974m. Barclaycard was impacted by a sharp increase in bad debts - total charge increased from £1.1bn to £1.8bn - although the rate of increase moderated in the second half and divisional pre-tax profit only dipped by 4 per cent to £761m helped by higher lending, improved margins and foreign exchange gains.

Overseas, the emerging market business struggled, posting a £254m loss, and Barclays' South African unit, Absa, saw profits fall 8 per cent to £506m. In fact, it was only the group's investment banking arm, Barclays Capital, that bucked that downwards trend - it grew pre-tax profit 89 per cent in 2009 to £2.64bn. That partly reflected robust trading in the UK and Europe, but was substantially helped by the acquisition of Lehman's north American business in September 2008; a deal that has left investment banking as Barclays' main profit centre.