Barclays posted impressive profits of £2.98bn for the first six months of 2009 – that’s 8% up on last year, despite the worst recession in decades. Although retail banking income was well down, investment banking profits actually doubled to over £1bn, thanks partly to the US division it picked up for a song in the Lehman Bros fire sale. Like HSBC, which also recorded profits around the £3bn mark during the period, it has profited from rivals’ misfortunes – but the problem is, boosting profits and hiking up staff bonuses is a sure-fire way of attracting opprobrium in the current environment…
Barclays’ figures were slightly below forecasts, but they still look fairly healthy in the circumstances. Crucially, it managed to avoid taking Government bail-out money when most of its UK rivals did, leaving it in a strong competitive position. That’s certainly true of Barclays Capital, its investment banking arm: the acquisition of those ex-Lehman divisions in the US (which are already contributing about 40% of its income) helped double profits from £524m last year to £1.05bn this time round. After Goldman Sachs posted bumper results last month, it’s another indication that investment banks have been cashing in as companies look to shore up their balance sheets.
Barclays has hardly been immune from the general meltdown: UK retail banking and commercial banking profits slumped 61% and 42% respectively, while the increasing number of borrowers defaulting on loans pushed impairment charges up 86% to a hefty £4.5bn (although apparently loss rates are stabilising). But there’s bound to be some suspicion about those investment banking results, particularly since they've apparently led to a 32% rise in salary and incentive payments. Barclays may have avoided taking the bail-out money, but it still benefited from the implicit guarantees – so it may stick in the craw to see BarCap staff taking home fat bonus cheques in this of all years.
HSBC also reported near-identical half-year profits of £3bn today (again, thanks largely to healthy investment banking results) – but it’s a bigger company than Barclays, and this was about 50% down on the same period last year. However, this may actually make its life easier, since raking in cash doesn't seem to be a great PR move at the moment (ask Goldman – a study by US firm Brand Asset Consulting just found that its reputation has plummeted in each of the last two years). Barclays might argue that its success is testament to the resilience of its model and the brilliance of its people. But some people are bound to see it as another example of bankers cashing in at a time when the rest of us are paying for their previous mistakes.
In today's bulletin:
Barclays in bother for making too much money
House prices to jump 20% within five years
A tough lesson from the University of Life
Denise Kingsmill: A slow summer in the city
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