Barclays said this morning that it expects pre-tax profits for 2007 to be £7.1bn, a like-for-like increase on last year’s record total of £6.8bn and broadly in line with market expectations. CEO John Varley said the bank had enjoyed 'good underlying growth' in retail and commercial banking in the nine months to September, and shown 'resilience' in its investment banking and fund management business 'in the face of turbulent market conditions'.
Its UK business is still going well, despite the row over penalty charges for customers who exceeded their overdraft limit. Barclays has so far coughed up £87m in refunds, although it’s holding off for now until the courts decide next year whether these charges are legal. Still, it doesn’t seem to have put customers off – profits were up both on the retail and commercial side, and there was a similar story at Barclaycard.
There wasn’t much more guidance about the performance of Barclays Capital, its investment banking arm. The division was forced to issue an emergency trading statement two weeks ago to try and stem rumours that it had incurred massive losses on sub-prime mortgages, and news that it had written off a ‘mere’ £1.3bn (rather than the rumoured £10bn) does seem to have calmed things down a bit.
Clearly Barclays hasn’t escaped unscathed from the recent market woes. But given these numbers, the dive in its share price seems a bit over-done. Although there was a decent rally this morning, the shares are still trading about 35% lower than they were in February – which could mean there’s a good opportunity to snap them up on the cheap.
That’s obviously the thinking behind the other big story that has boosted the banking sector this morning: the Abu Dhabi Investment Authority’s acquisition of a 4.9% stake in Citigroup for $7.5 billion. As well as providing another demonstration of the financial muscle of these Middle East funds (following Dubai International Capital’s purchase of a stake in Sony yesterday) it’s also a rare bit of good news in what has been a wretched few months for the giant US bank.
Barclays, of course, already has its own sovereign wealth fund investors – The China Development Bank and Temasek, the investment arm of the government, who bought a stake this summer. Like ADIA, they’re betting that the sector’s actually in better shape than the market seems to think...