Barclays profits almost double to £11.6bn

By Adam Jones
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Barclays kicked off the results season for UK banks on Tuesday by reporting a forecast-beating £11.64bn ($18.3bn) annual pre-tax profit.
It also said it was distributing £1.5bn in cash bonuses to staff, along with a further £1.2bn of longer-term awards that would vest over three years and be subject to a clawback option.
However, John Varley, chief executive, and Bob Diamond, head of the group’s Barclays Capital investment banking arm, are forgoing bonuses for the year.
The 2009 profit figure is almost double the £6.08bn Barclays reported for 2008, beating the £11.23bn analysts’ consensus forecast compiled by the bank. Total income net of insurance claims rose 34 per cent to £30.99bn.
The 2009 profits were boosted by the sale of Barclays Global Investors, the asset management business, to BlackRock in December.
Excluding those proceeds and other volatile elements that distort underlying performance, pre-tax profit was £5.63bn, more than triple the £1.64bn posted in 2008.

Barclays 2009 results

Income Pre-tax profit Earnings per share Dividend

£30.99bn
£11.64bn
81.6p
2.5p

↑ 34%
↑ 92%
↑ 42%
↓ 78%

Shares in Barclays jumped 6.8 per cent to 293¾p in mid-morning trading in London. Having rallied strongly from a deep trough in early 2009, they have slipped back from almost £4 in recent months.
As expected, Barclays tried to minimise any backlash against its bonuses by saying that Barclays Capital had cut the proportion of divisional income it distributed to staff.
BarCap employees are being paid 38 per cent of the division’s income, a compensation ratio that compares with 44 per cent in 2008.

The move reflects a trend across the industry to try to make overall compensation pools less glaringly large. Goldman Sachs, for instance, pegged its compensation ratio at 36 per cent in 2009, its lowest level as a public company.

Barclays said Mr Varley and Mr Diamond were forgoing bonuses out of consideration for the impact the economic downturn had had on customers and shareholders, as well as a recognition of the keen public interest in bankers’ pay.
All 2009 discretionary pay for other members of the Barclays and Barclays Capital executive committees will also be staggered over a three-year period and subject to clawback arrangements.
The supertax on bank bonuses announced by the UK government in December was expected to cost the bank £225m for payments made in 2009 and previous years, the bank added.
In an unusual preface to the results, Marcus Agius, Barclays’ chairman, acknowledged that many had lost faith in banks during the credit crunch and its aftermath.
“The bond of trust between banks and their stakeholders has been significantly weakened by the events of the last three years,“ he said, before asserting that banks could make significant contributions to society by being successful.
Barclays was one of the UK banks that did not need a direct capital injection from the government to survive the financial crisis.
In the results statement, Mr Varley defended the role of BarCap within the group, saying it provided a “strong source of resilience” at points in the economic cycle when retail and commercial banking were not faring so well.
Aided by the purchase of Lehman Brothers’ US investment banking and capital markets business in September 2008, BarCap’s pre-tax profits almost doubled to £2.46bn in 2009, compensating for sharp falls in profits at its UK retail banking arm and at its UK and Ireland commercial banking arm.
Across the Barclays group, loan impairment charges and other credit provisions rose by half to £8.1bn, although the value of loans going bad fell 23 per cent in the second half of the year relative to the first half.
Robert Le Blanc, Barclays’ chief risk officer, said he expected a lower level of impairments in 2010. “We believe we are past the worst and expect to see a moderate decline in impairments through the year.”
A final dividend of 1.5p per share for the second half of 2009 will be paid on March 19, making a total of 2.5p for the year. This compares with 11.5p in 2008, when Barclays failed to pay a final dividend in order to build up its capital.
Barclays said it aimed to increase future dividends from an annualised base of 4.5p per share.