Loading...
-
Re: Barclays' profits plunge 'acutely disappointing'
Barclays today posted a sharp drop in profits and wrote off another billion pounds as the credit crunch continued to pummel Britain's banks.
Britain's third-largest bank said that it made pre-tax profits of £2.75bn in the first half of the year - slightly more than analysts had predicted but 33% lower than a year ago when it made £4.1bn.
The fall in profits, which chief executive John Varley admitted was "acutely disappointing", was largely caused by the ongoing credit crunch, which sent profits at its Barclays Capital division tumbling by over two thirds to £524m. The bank said that Barclays Capital had suffered losses of almost £2bn through its exposure to the credit market, including securities backed by US sub-prime mortgages.
Barclays said it would make fresh writedowns of £1bn as it tries to cut its exposure to the credit markets. This is in addition to the £1.9bn that it has already written off this year.
Its total impairment charges came to £2.45bn, up from £959m. As well as Barclays Capital's charges, this included a rise in bad debts from business customers and in the UK mortgage market.
The bank had been criticised for not marking down its assets as much as rivals but Barclays insists its assets are of higher quality. In a conference call today, Varley said there had been "a great deal of disclosure" in today's results statement and that he was "completely confident about the rigorous approach" of markdowns.
These latest writedowns come less than a month after Barclays' £4.5bn fundraising drive from investors such as the Qatar Investment Authority.
Varley said that conditions in the banking sector over the last year had been "as difficult as we have experienced in many years".
"Although I take some comfort from our relative performance in managing our risks and in generating income, a decline in profit of 33% is acutely disappointing. And I add to that my disappointment at the decline in our share price. Our shareholders have had to endure a lot," he said.
There was little respite for these long-suffering investors, who have watched Barclays's shares fall by 45% this year. The company dropped another 1.7% in early trading to 363p, a fall of 6p.
Looking forward, the group's president, Bob Diamond said that there would more "challenging environments" for the balance of 2008 and 2009. However, he said the issue of liquidity was no longer a problem following co-ordinated action by central banks to inject money into the markets.
"That has been by and large resolved," he said, adding that the concerns now were the oil price and how much the global economy will weaken as markets wait for an end to the freefall in the US housing sector.
Varley said that the difficult trading conditions also created new opportunities for Barclays to expand its market share and diversify its business which would help the bank weather the downturn.
Tweet
Comment