Barclays set to leave UK if it’s broken-up

BARCLAYS mounted a staunch defence of “big banking” yesterday as its first-half performance failed to impress analysts, who described the hefty profit boost as “low quality”.

Chief executive John Varley used his results speech to warn the government against breaking up large institutions into separate investment and retail banks. Varley argued FTSE 100 companies needed banks that were able to take cross-border risk to help them export. He said smaller banks were not necessarily more resilient than others to harsh economic winds, adding: “By converting broad banks into narrow banks we will make the system less safe, not more safe.”

Chairman Marcus Agius hinted Barclays could leave the UK should a Glass-Steagall separation law come in.

But speaking to City A.M. after the presentation, Agius said Barclays had nothing to fear from America’s so-called “Volcker rule”, which demands banks spin off their proprietary trading activities, as Barclays Capital had negligible revenues from the area. Barclays executives said regulatory uncertainty and lack of global coordination were the bigger problems.

Their comments came as the British group revealed a 44 per cent leap in first-half pre-tax profit to £3.9bn, with bad debt writedowns falling 32 per cent. After stripping out exceptional items, Barclays’ pre-tax profit rose 22 per cent to £3bn.

Shares in Barclays slipped 4.7 per cent to 324.7p, however. Ian Gordon at Exane BNP Paribas said: “This is a low quality consensus beat.”