Slump hits 'disappointed' Barclays

By Emily Flynn Vencat  |   2008-8-8  |     NEWSPAPER EDITION

BARCLAYS PLC, Britain's third largest bank, said yesterday that first-half profit fell by 35 percent, as securities trading slowed and credit writedowns mounted.

Net profit for the six months to June 30 was 1.7 billion pounds (US$3.3 billion), down from the 2.6 billion pounds the company made in the first six months of last year.

Revenue for the January-June period fell slightly to 11.8 billion pounds from 11.9 billion pounds in the first half of 2007.

"Although I take some comfort from our relative performance in managing our risks and in generating income, the decline in profit ... is acutely disappointing," said Chief Executive John Varley.

The bank suffered 2.4 billion pounds of impairment charges in the first half, including 1.1 billion pounds as a result of its exposure to United States subprime mortgages and other credit market problems. That figure was on top of the 959 million pounds worth of writedowns the company reported in the first half of last year, and the 1.8 billion pounds it reported in the second half of 2007.

Barclays said, however, that it wouldn't need to find more capital despite the large writedowns. That is because, like the Royal Bank of Scotland and HBOS - several of the other British banks struggling in the credit crunch - it has already gone to investors for more capital.

In July, Barclays raised 4.5 billion pounds in a share sale to Qatar's sovereign wealth fund and other, largely foreign, investors.

Varley said the funds were being used to fortify reserves, hire US investment bankers and expand consumer and credit-card lending in the fast-growing markets of Asia and the Middle East.

"The extraordinary events of the last year create significant opportunities ... for us to take market share," Varley said yesterday.

Indeed, Barclays' emerging markets income increased by 86 percent in the first half to 410 million pounds, as the number of branches and other sales centers the bank has in those markets nearly tripled from 321 to 871. Like the other British banks who used rights issues to shore up their financial positions in the current crisis, Barclays is also selling assets to boost its capital. On Tuesday, the bank agreed to sell its life assurance business to Swiss Re, the world's largest insurer, for around 753 million pounds in cash. Shares fell 1.7 percent to 363 pence in London trading yesterday morning.