Barclays, HSBC stage banking sector fightback

The pair, which have avoided state control unlike rival British banks, posted combined net profits of $6.55 billion (4.58 billion euros) for the first six months of the year.

Barclays’ profit rose and although net earnings at HSBC fell they were better than expected and still reached $3.35 billion.

The results set the tone for results due this week from state-controlled Lloyds and Royal Bank of Scotland, as well as nationalised Northern Rock.

All three were devastated by the global financial crisis and were bailed out by British Prime Minister Gordon Brown’s Labour government.

However, Barclays said Monday that it made a “good start" to 2009 and was “strongly positioned for the upturn."

HSBC, Europe’s biggest bank, said the results proved it could generate profits “throughout the business cycle -- even in challenging market conditions."

In London stock market trade, Barclays shares surged more than 8% higher and HSBC stock won more than 6%, helping push the FTSE 100 index to its highest level so far this year.

The FTSE, which was also powered higher by rising commodity prices, hit a ten-month peak of 4,693.06 points in earlier morning deals.

HSBC also forecast the deep downturn could be past the worst amid international efforts to repair the shattered global financial system, which has yet to recover from the credit crunch which erupted in August 2007.

“Operating conditions in the financial sector have continued to improve as the effects of government and central bank policies work through the system and it may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets," said HSBC chairman Stephen Green.

“Nonetheless, the timing, shape and scale of any recovery in the wider economy remains highly uncertain. Our view continues to be cautious as long as a number of serious impediments to growth remain."

Barclays said its first-half net profits soared nearly 10% as its investment banking unit was boosted by markets turmoil and the part-purchase of Lehman Brothers.

Net earnings leapt 9.9% to 1.9 billion pounds (2.2 billion euros, $3.2 billion) the six months to the end of June, compared with 1.7 billion pounds in the same part of 2008.

But impairment charges and other credit provisions almost doubled to 4.56 billion pounds.

Barclays has avoided nationalisation in the wake of the credit crunch by courting investment from wealthy Gulf states.

In 2008, Barclays secured additional capital from investors in Abu Dhabi and Qatar in order to bolster its finances.

Meanwhile, HSBC said Monday that its first-half net profits slumped by 57% to $3.35 billion (2.35 billion euros) as bad debts ballooned by 39% to $13.9 billion .

Despite tumbling profits, HSBC had bolstered its finances earlier this year when it raised 12.5 billion pounds ($18 billion, 13.7 billion euros) via a sale of new shares.

Analysts argue that many leading bank executives were attracted by short-term profits and large bonuses, damaging their ability to take well-judged business risks, and helping spark the global financial crisis.

The prime minister’s official spokeswoman said Monday that banks needed to ensure that they were chasing long-term stability rather than quick profits.

“We need to make sure that what we see is more credit flowing into businesses and households... it’s important we’re looking at long-term stability and not short-term profit," she told reporters.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!