Barclays profits rocket after boost from Lehman business

Nick Goodway
7 May 2009

Barclays today posted a 15% rise in profits driven by its investment banking division Barclays Capital, which for the first time included Lehman Brothers' New York business.

Bob Diamond, president of Barclays and boss of its investment banking and fund management businesses, paid £1 billion for the US operations of Lehman at the back end of last year.

Today that deal, which Diamond called “transformational”, was seen to have paid off with BarCap's profits soaring by 361% to £907 million.

Including strong growth from institutional fund management but a “significant fall in wealth management earnings the division made profits up from £365 million to £1.05 billion.

The other side of the bank, retail and commercial banking, saw a sharp fall in profits from £1.07 billion to £586 million as the recession started to bite around the world.

Total group profit increased 15% to £1.37 billion on revenues which were 42% higher at £8.15 billion. Barclays shares, which have risen sixfold from their low point this year, gained 21/4p to 2091/4p, having peaked earlier at 307.

Chief executive John Varley who has kept the bank free from taking UK Government support, said: “We generated strong income growth across most business lines. This, together with good cost control, has enabled us to shield the anticipated increase in impairment and absorb further credit market write-downs.”

Barclays took a much bigger hit on bad loan and credit crunch writedowns with its impairment charge jumping from £1.29 billion to £2.31 billion.

Within that, impairments at BarCap rose 45% to £1.1 billion of which £754 million was toxic asset writedowns.

In retail and commercial banking, High-Street loan writedowns rose in line with the weak economy, mortgage writedowns remained low but corporate bad debts shot up and there was also a sharp rise in UK Barclaycard impairments.

Finance director Chris Lucas said: “The economy is still not yet in great shape. We have seen a few things during March that are a bit better than they were in January and February, but I would not like to use the phrase green shoots. We are very much keeping our focus on asset quality and credit risk assessment.”