Barclays, Britain’s third-largest bank, said first-half profit rose 29 percent, as a drop in provisions for bad loans mitigated a decline in investment banking revenue.
Net income rose to 2.43 billion pounds ($3.9bn) from 1.89 billion pounds in the year-earlier period, the London-based bank said in a statement on Thursday. Earnings beat the 2.26 billion- pound median estimate of 10 analysts surveyed by Bloomberg.
Barclays follows HSBC Holdings Plc and Lloyds Banking Group Plc in reporting a gain in first-half profit as provisions for bad loans dropped by almost a third to 3.1 billion pounds. Revenue at Barclays Capital, the investment banking operation led by Robert Diamond, dropped by 32 percent as income from the division’s rates and commodities operations declined. Costs at the unit rose by a third.
“The second quarter was tough,” Diamond, 59, said on a conference call. “Clients were taking less risk in that period of May and June. We have clearly seen in the second half of July more activity in the market. I don’t want to predict how that all plays out for the second half, but it looks more positive.”
Barclays fell 3.1 percent to 329.45 pence at 8:30 a.m. in London trading. Barclays has dropped 1.9 percent in the past 12 months, making it the worst-performer in the FTSE 350 Banks Index, which climbed 11 percent in the period.
Barclays’ “numbers were broadly in line and the Barclays Capital revenue number was strong relative to peers,” Jonathan Pierce, an analyst at Credit Suisse Group AG in London with an outperform rating on the shares, wrote in a note to clients on Thursday. “But Barclays Capital full-year revenue forecast might still come under pressure and costs are overshooting estimates. We think there is better value elsewhere.”
Revenue from trading bonds, currencies and commodities declined by 40 percent to 4.9 billion pounds. Sales at Barclays Capital’s equities and prime services unit, which provides services to hedge funds, fell 18 percent to 1.06 million pounds due to a slowdown in equity derivatives.
“Investment banking volumes picked up in the second half of July matching the second quarter run rate which was resilient,” the lender said.
Barclays is increasingly dependent on Barclays Capital for its earnings after sold its Barclays Global Investors fund management unit to BlackRock Inc. for $15.2 billion in December to boost capital and avoid a government bailout. The unit generated about 66 percent of the bank’s pretax profit in the first half, up from half last year. Varley said in February he would like the bank to generate a third of profit from Barclays Capital “over time.”
Costs rose 21 percent to 9.72 billion pounds, reflecting the “build out” of Barclays Capital and its private banking unit, the lender said. The bank hired 750 people in Asia and Europe last year to expand its equities and mergers advisory unit and acquired the North American operations of Lehman Brothers Holdings Inc. in 2008.
Pretax profit at Barclays’s consumer unit in the U.K. jumped 61 percent to 504 million pounds, and profit from wealth management rose 27 percent. The bank’s western European consumer unit posted an 89 percent decline in profit.
The bank will pay a dividend of 2 pence a share for the first-half, it said. (Bloomberg)
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