Barclays said this morning that it would increase its dividend by 10% after its full-year results for 2007 came in above expectations. Despite the rigours of the credit crunch, annual profits were a healthy £7.08bn, only marginally below 2006’s record figure of £7.14bn. This included a £1.6bn write-down for sub-prime investments – less than the City was predicting. So not exactly spectacular, but hardly the doomsday scenario some people had been suggesting.
However, over at its Canary Wharf neighbour Credit Suisse the picture was a lot gloomier. Just a week after reporting its own full-year results, the Swiss bank admitted today that it had found ‘errors’ in the valuations of its sub-prime investments and will now have to write off an extra $2.85bn – which could take another sizeable chunk out of 2007 profits. It insisted it was still in line to make a profit of $1bn this quarter, but it’s still been left with some serious egg on its face. And if there’s one thing investors don’t like, it’s eggy faces – the bank’s shares quickly plunged nearly 10%.
Barclays, on the other hand, sounded a lot more chipper. Despite the turmoil of the last six months, its investment banking business Barclays Capital still managed to record profits that were 5% higher than last year’s record figure, after a storming first half. And the fund management business Barclays Global Investors also made more money than last year. ‘I would say they have handled the stress test of 2007 pretty well,’ CEO John Varley (soon to be MT’s cover star) said today. This has given the bank confidence that it can cope with whatever 2008 can throw at it, he added.
Varley reckons that things are slowing down in the UK – so he expects much of Barclays’ growth to happen abroad. And the signs are good: last year it opened more than 600 new branches and call centres outside the UK, leading to a rise of nearly 30% in its international business revenues.
And with hindsight, Varley will probably feel that one apparent blot on Barclays’ 2007 copybook – losing out to RBS in the takeover battle for ABN AMRO – could turn out to be a blessing in disguise. With share prices down across the sector, it’s looking rather like RBS might have paid over the odds. Not that he can exactly claim any credit for it, but this could turn out to have been a good fight to lose...