2009-08-03 09:01:59
Barclays has announced an 8% rise in first-half profits, boosted by its
investment banking division.
Pre-tax profits for the first six months came in at 2.98bn ($5bn), although
this was slightly below analysts' forecasts.
Profits at its investment bank Barclays Capital doubled, but those at its UK
retail banking arm more than halved.
HSBC reported half-year profits of $5bn, although this was about half what it
made in the same period a year ago.
Shares in Barclays rose 9% in morning trading, while HSBC climbed 4.6%.
Rising bad debts
BBC business editor Robert Peston says the striking number in Barclays' results
is the massive reduction in loans and investments across the world, which have
come down from 2 trillion to 1.5tn.
Total bad debts, across all parts of Barclays' international businesses, rose
from 2.45bn to 4.56bn.
HSBC was also hit by rising bad debts in the US, Europe and Asia, forcing it to
write-off $13.9bn - 39% more than the same period in 2008.
HSBC is currently in the process of closing its US consumer lending business,
which suffered heavy losses from mortgages which went unpaid.
Barclays and HSBC are the first major UK banks to report half-year figures,
with Lloyds Banking Group and Royal Bank of Scotland reporting later in the
week.
Investment banking 'back'
Profits at its UK retail banking division fell 61% to 268m, from 690m a year
ago.
But profits at Barclays Capital rose to 1.05bn, from 524m a year ago.
Investment banking is booming again - partly thanks to the frenzied attempts
by big companies and governments to raise vast amounts of new money
Robert Peston, BBC business editor
Ralph Silva, banking analyst at Tower Group, said that not accepting government
money would have contributed to Barclays Capital doing so well.
"Investment banking is back. If you are a big company you are going to
gravitate towards the banks that have not received government funds," he said.
The BBC's Robert Peston says the most resonant measure of how Barclays has
performed can be seen in the pay of staff at its investment bank.
The average pay and benefits of the 22,000 people who work for Barclays Capital
was almost exactly 100,000 for just the first six months of the year, our
correspondent says.
'Strong performance'
Barclays said it had gained more investment banking clients thanks to the
acquisition of some Lehman Brothers businesses in 2008.
The addition of some of the Lehman businesses also "increased significantly"
Barclays' presence in the US, the bank said.
The US now accounts for about 40% of its income.
Barclays chief executive John Varley was upbeat on the bank's prospects for the
rest of the year.
"The investments we have made, particularly in our international businesses,
are driving very strong income performance and allowing us to absorb the
consequences of the economic downturn," he said.
"Our goal for 2009 is very clear: we seek to deliver another year of solid
profitability. Our first half performance is a good start to this."
Bad debts rise
Barclays' High Street operations recorded a 63% increase in bad debts, from
288m in the first half of last year to 469m in the first half of 2009.
The bank said this amounted to just under 1% of its total lending.
Bad debts among mortgage customers remained "relatively low" at 35m, although
this was far higher than the figure of just 1m recorded a year ago.
But the recession has led to a near doubling of bad debts among Barclaycard's
credit card customers.
The amount of credit card borrowing that had been written off as a result of
defaulting customers rose by 92% to 915m, with the recession in the US behind
much of the rise.