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The bosses of Barclays and HSBC said this afternoon that the worst of the financial crisis was over as the two banking giants announced combined profits of nearly £6 billion in the first half of the year.
It sent shares in London soaring with the FTSE 100 index up 72.2 to 4680. The index of blue chip companies is now well above its low of 3512 in March. Barclays shares rose by 6.6 per cent and HSBC was up 5.8 per cent.
Other figures today added to growing optimism that the recession may be drawing to a close. The manufacturing sector grew again last month and estate agents reported an increase in activity with buyers encouraged by falls in house prices and low interest rates.
Barclays also revealed it lent £17 billion to UK households and business in the first half of this year — outstripping the £11 billion target it set for the whole year.
The profits of Barclays and HSBC should lead to bumper bonuses for thousands of bank staff in London. This will spark outrage among critics who claim excessive risk-taking and lavish rewards were at the heart of the banking crisis which plunged the global economy into the most severe recession since the Second World War.
Bonus payments by all banks could hit £4 billion this year, up from £3.3 billion last year, according to the Centre of Economic and Business Research.
Liberal Democrat Treasury spokesman Vince Cable said: “Without the taxpayer many banks would be without a job, let alone a huge bonus. Their greed and excess risk-taking led to the crisis, which is now costing millions their jobs and their homes.”
Barclays' president Bob Diamond said the country was “past the worst” in terms of losses which have battered the financial sector. The bank now plans to hire 1,000 more staff including investment bankers at its Barclays Capital unit.
HSBC chairman Stephen Green said: “It may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets. Nonetheless, the timing, shape and scale of any recovery in the wider economy remains highly uncertain.”
Philip Gillet, a trader at IG Index in the City, said today: “All eyes have been on the banks. There seems to be no change to the optimistic mood at the moment. Rather than being concerned about the rally running out of steam, there is more a worry of missing the boat as the market powers higher.”
Barclays and HSBC, which turned down taxpayer funds to help them through the credit crunch, reported profits of £2.98 billion each — both driven by a strong performances at their investment banking arms.
However, bad debts increased as the Canary Wharf-based pair were hit by rising unemployment and recession in the UK and beyond which meant customers struggled to pay back loans.
Despite the pain felt by customers, 21,900 staff at Barclays Capital are in line for average pay and bonuses of £200,000 to £250,000 this year — at least double the £100,000 of last year. Most will pick up far less than the average as the lucky few pocket millions.
Top earners are likely to include Barclays Capital boss Mr Diamond, tax expert Roger Jenkins and head of investment banking John Winter. Mr Diamond picked up nearly £40 million in 2007 but “only” £250,000 last year after he agreed to take no bonus because of the financial crisis. Others set for windfalls are US bankers Eric Felder, Gerald Donini and Hugh McGee who were taken on by Barclays when it bought the investment banking business of collapsed rival Lehman Brothers.
Reader views (10)
Keith Price - still clutching at straws. That recovery you laud? Is it permanent, or just part of the ebb and flow of finance that was inevitable (after all, the high finance people basically lost their excessive PROFITS, not their core wealth)? How is this 'recovery' affecting the recently unemployed? How is it affecting the massive national debt your darling saddled the UK with? How is it affecting the people who have lost everything they had, homes, cars, property? Factory output is up is it? In how many of the remaining factories? The car industries improving? From what depths, and again, in how many remaining factories? Immigration? Health care? Education? Crime? Loss of national identity?
Gordon Brown, saviour of the universe. I don't think so. The fact that you are impressed is hardly a guideline for other's view of the government's performance. Some might suggest the reverse was true perhaps. Blinkered perceptions are usually understood to be somewhat flawed as they see only what they would rather see as opposed to the less convenient whole. Now some might say the same of me as I'm no left winger - but I don't think I could be accused of taking rare appearances of single false positives and extrapolating a UK Shangri-la from them at the drop of a hat. The multitudinous negatives appearing almost daily from GB require no extrapolation however. They are harsh reality.
- Rogan, Irving
Dirk has got it spot on. The Banks were given money at virtually 0% interest. Just look at your statements and tell me why any Bank will now make a loss.
- Ayliff Mcnab, Spain
Marvellous pic accompanying this story!
- Peter Seekings-Foster, Mildenhall, Suffolk.
Well they didn't lose much money paying interest on our savings
- Alan John, Meopham, Kent
Yes Andy..you are right but I was speaking about the overall banking situation. HSBC and Barclay's who acted more cautiously on mortgages still were helped by the Government guarantees.
- Corbo, Norwich England
Corbo - I don't know about HSBO but I don't think Barclays had any money from the Government...banks that borrowed from the public purse were Lloyds, RBS & Northern Rock...although all banks have, generally, failed to help their customers
- Andy, london
Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton, England
There are many contradictions and ironies amongst the madness of the economic and banking casino free for all. To my mind the biggest farce and crime is that the taxpayer of now and of the future has bailed out the reckless feckless greedy casino banks and they get support from so called socialists and Labour party types. It is amazing. They are already at it again. Losses are nationalised and profits are privatised and they seem to be getting away with it. I suppose people will only wake up to this if/when they go hungry.
- Corbo, Norwich England
So when are the banks going to reduce interest rates to help homeowners and small businesses who have all struggled and continue to struggle thanks to the banks earlier incompetence?
- Andy, london
There is something wrong with banking if they can rack up this kind of profit in such a short time. I guess is they borrowed any money from the government; they will be repaying this money with interest.
- Dirk Diggler, Soho, London
