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Barclays and HSBC today reported strong profits, fuelling hopes that the worst of the banking crisis is over.
At Barclays, first-half profits rose 8% to £2.98 billion while HSBC said profits were $5 billion (£2.98 billion) down 51% on a year ago but significantly better than the second half of last year.
HSBC said in a statement: “It may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets.”
Shares in HSBC leaped 4% on the news. Barclays also rose. HSBC said it was “strongly positioned for the upturn” but added that the economic outlook continued to be uncertain.
The pair are seen as being the two most healthy British banks, having both got through the crisis so far without government aid.
Barclays today revealed it lent £17 billion to UK households and business in the first half of this year — already outstripping the £11 billion target it set for the whole of 2009. Chief executive John Varley insisted Barclays was open for business amid claims that the industry is starving the economy of the lending necessary to drive a recovery. “We take our obligations to the British economy very seriously,” said Varley.
The Government is concerned that banks are hoarding funds and has ordered state-owned banks Royal Bank of Scotland and Lloyds Banking Group to lend an extra £38 billion this year after the taxpayer stumped up £37 billion to keep them afloat.
Barclays' revenues were up 37% to £16.25 billion. Varley said that while the economic environment remained tough the group would continue to focus on risk management and decent returns for shareholders.
He said the bank planned to start paying quarterly dividends again before the end of the year. However, the proportion of profits distributed through dividends will be significantly lower than the 50% level of recent years as the bank keeps cash back in reserve.
“We have our feet on the ground,” said Varley. “The environment will not be easy but I think it is right for us to be appropriately confident about our ability to manage in the future because I think we've managed reasonably well in the past.”
He said the trends seen in the first half continued in July.
Profits at investment banking arm Barclays Capital doubled to £1.05 billion in the first half.
It benefited from the $1.75 billion (£1.04 billion) acquisition of the US arm of Lehman Brothers following its collapse in September last year.
At the time, Barclays Capital boss Bob Diamond said it was “a once-in-a-lifetime opportunity for Barclays”. Varley today said: “It is working well. We have saved four to five years of organic development. It is a very high-quality business.”
The Lehman deal doubled the size of the Barlcays Capital business in the US and it now does 40% of its business in America.
Barclays Capital profits were driven by “excellent results” in fixed income, currencies and commodities. Income was up 79% to £6.09 billion after it absorbed credit market losses of £3.5 billion. Profits at UK banking slumped 61% to £268 million as the recession sent bad debt charges soaring.
Reader views (5)
Banks making money "Its what Capitalism is all about." Of course we could adopt the old Soviet system and set up Browneskis Co-Op.
HSBC never needed any money it is a world bank a fact often forgotten by the little englanders who support the Tory party. For them our business is mere chicken feed compared to their dealings in the far east.
What this does mean is the taxpayer will get their money back in time for the next election and Team GB will triumph!!
- Melvyn Windebank, Canvey Island, Essex, 04/08/2009 13:46
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Well said Quentin! Recession over...! - Dream on little people! It was all just a nasty nightmare, but daddy's here now - (insert name of PM of the day) - Everything's going to be all right. What's that you say? Debt the size of our total GDP? Just papering over the cracks with printed money?? Now, now Don't be silly! What have I told about thinking for yourself!
- James Murphy, !, 03/08/2009 19:44
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If you remove a significant number of competitors from any market then those left will make huge additional (and undeserved) profits. With many banks in intensive care, or bust, Barclays' and HSBCs' share of the pie has grown hugely. Add to this the easy money to be made issuing government debt (that's taxpayers money paid to the bankers who caused the crash to issue taxpayers debt which we'll be paying off for years) and you can see that the bankers at Barclays and HSBC are making easy money once again. They are all very grateful to our spineless politicians, who have done nothing to change this and have simply allowed a return to business as usual. Watch where Darling, Brown etc end up working once they've been thrown out of office. They'll be making millions at the very banks they've helped so much. Does this matter? Well, when the next crash comes within the next decade we will not have the money left to both bail out the banks once again and pay for the NHS, education etc etc. So next time you are in Canary Wharf, dying of a preventable illness, pray thanks to the profit kings!
- Bobby Smith, london, 03/08/2009 14:33
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During the worst excesses of our recent bubble period,BarCap were one of the leading investment banks formulating all those opaque structured finance instruments for clients that have caused so much damage and destroyed so much capital that could have gone to productive areas of the world economy. They even were credited with devising that basket case, the "SIV Lite". Back to business as usual for this lot and clearly no shame.
- David Stephens, London, 03/08/2009 13:43
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These mega-profits have nothing to do with the possible recovery but simply the government injected money (into the financial system), not surprisingly, is coming out on the other end as banks profit. This is basically your money. It is pretty disturbing: a systemic theft. (It does not matter that Barclays and HSBC did not get the government help directly. Others did and it is a systmic phenomenon.)
Read these execellent analyses. Maybe lengthy and detailed but really explaining excellently what's going on:
http://gregpytel.blogspot.com/2009/07/held-by-throat.html
http://gregpytel.blogspot.com/2009/04/largest-heist-in-history.html
(The latter one was actually published by House of Commons, Treasury Committee.)
Warning: it is not for the faint-hearted.
- Quentin, London, UK, 03/08/2009 13:03
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