Money Matters, Simplified.
Barclays Plc. reports 92% increase in profit
by Ishita Sood - February 16, 2010 - comments
Barclays, which is headquartered in London, acquired the North American operations of Lehman Brothers Holdings Inc. in 2008.
Barclays Plc., UK’s second-largest bank, reported an increase in profit at $18.2 billion, up by 92 percent. The figures were majorly boosted by the sale of its BGI fund management unit to U.S. group BlackRock.
This was Barclay's first increase in nine months.
Barclay’s Chief Executive Officer John Varley and President Robert Diamond declined to take bonuses for a second year after the news. The bank announced Tuesday that it will now set aside only 38 percent of revenue for employee remuneration, 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 Asset Management in Zurich. “I think that takes a lot of pressure off Barclays.”
Barclays’ strengthened capital position
Barclays reported an increase in bad loan provisions from 5.4 billion pounds to 8.1 billion pounds. Its Tier 1 capital ratio climbed to 10 percent. Barclays also absorbed 1.8 billion pounds of credit losses while its net income rose to $14.8 billion (from a year earlier).
“We have strengthened our capital position, reduced leverage and added to our liquidity buffer,” said Varley 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.”
Richard Hunter, of Hargreaves Lansdown stockbrokers, said the results were a “proof that Barclays had skillfully woven its way through the recessionary minefield.”
He also added that all figures were extremely impressive, with or without the sale of BGI.
Barclays boosted lending in 2009, impairment levels improved
Chairman Marcus Agius said Barclays also boosted lending in 2009.
“We believe that when the behavior of banks is assessed by their stakeholders to see whether we have genuinely learnt from the experiences of the last years, we will be judged mostly by how we conduct our business and, in particular today, by how we lend and how we pay,” he said.
The bank also said that its impairment levels in the second half of 2009 were 23 percent, a big improvement from 2008.
“Whilst we expect 2010 impairment levels to rise in certain books of business, particularly in our commercial lending portfolios, our planning assumption is for a moderate decline in impairment,” said Agius.
Barclays, which is headquartered in London, acquired the North American operations of Lehman Brothers Holdings Inc. in 2008.
The bank gained 8.6 percent in London trading on Tuesday.