Barclays’ bumper profit gives lenders a timely share boost
BARCLAYS beat forecasts with a near doubling of profits in 2009 to £11.6bn (€13.3bn), cheering investors with an improved balance sheet and boosting shares across the sector.
Shares in the bank, the first British lender to report earnings this year, jumped more than 7pc on the bumper profit and lifted its rivals, as investors welcomed its relatively optimistic outlook for 2010 and good news on bad debts and capital ratios.
The bank has a relatively small operation in Ireland, where it lends to wealthy individuals and advises people on wealth management.
“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 specialises in financial-services firms.
“My biggest concern about Barclays is that too much of their profit is coming from one single line of business.”
Britain's second-largest bank by market value avoided a bailout during the crisis, but has still been hit by a backlash over banker pay.
It said yesterday it had reined in payouts, with its two top executives refusing their cash bonus.
“It’s a big message, it is a very smart move politically,” said Florian Esterer, who helps manage about $58bn at Swisscanto Asset Management in Zurich.
“I think that takes a lot of pressure off Barclays.” Barclays’ profits were swollen by a £6.3bn gain on the sale of its Barclays Global Investors (BGI) asset management arm.
Underlying profit, stripping out the BGI gain and other one-off items, more than trebled to £5.6bn, which analysts said was about 5pc ahead of expectations.
Expansion Earnings at Barclays Capital, the investment bank arm, jumped 89pc to £2.5bn, thanks to its purchase of the US operations of Lehman Brothers, expansion in Europe and Asia, and a revival in capital markets.
“They have surprised positively in revenues, particularly in investment banking,” said Arturo de Frias, analyst at Evolution.
Analysts said last year's bad debts of £8.1bn were below expectations of nearly £9bn, but the analysts added that Barclays could be one of the hardest hit banks from proposed new rules on bank capital, dubbed Basel III, that are due to come into effect by the end of 2012.
It could need £17bn to repair an equity Tier 1 ratio that would fall to 5pc under the Basel III proposals, Credit Suisse estimated. (Bloomberg)