Profits surge at Barclays

BARCLAYS yesterday lit a firecracker under the UK banking sector as it posted a 92 per cent surge in full-year profits, thanks to a sterling performance in its investment banking division and a one-off windfall from the sale of its asset management arm last year.

Pre-tax profit rose to £11.6bn, up from £6.1bn in 2008, after the bank booked a £6.3bn gain on its sale of Barclays Global Investors unit to BlackRock in June last year.

Barclays Capital, the investment bank led by president Bob Diamond, contributed £2.5bn to the group’s profit haul, an 89 per cent improvement on the previous year. The division’s stellar performance was boosted by strong growth in fixed income, currency and commodities trading, particularly in the depressed markets of the first half of the year, as well as the continued integration of the US businesses of failed bank Lehman Brothers at the end of 2008.

Bad debt charges rose to £8.1bn, from £5.4bn in 2008, though the figure was well below the bank’s guidance range of between £9bn and £9.6bn. Chief risk officer Robert Le Blanc said he is confident Barclays is “past the worst”, forecasting a modest decline in impairments over 2010.

Crucially, the bank almost doubled its core tier one capital ratio – a key measure of the bank’s financial strength – to 10 per cent, improving its buffer against future losses.

Barclays – the first of a clutch of UK banks to report annual figures in the next few weeks – said it had committed £35bn of gross lending to the wider economy over the past year, over three times its previously-stated target of £11bn. Half of the money was earmarked for business loans, while the other 50 per cent consisted of lending to individuals.

Chief executive John Varley said the bank will pump £350m of investment into Barclays Wealth, which manages assets for an elite list of high net worth clients.

Barclays Wealth aims to double the number of private bankers in the division, after assets under management jumped from just £3bn to over £150bn during 2009.

The group earmarked a total of £225m for the government’s Bank Payroll Tax, £190m of which will cover the cost of 2009 cash bonuses. Barclays also put aside £35m to cover a potential levy on prior-year equity awards, though it has not yet received final guidance from the government over the full scope of the tax.