BackBarclays banks record annual profits despite rising bad debts
Barclays banks record annual profits despite rising bad debts
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LONDON: British bank Barclays said on 20 February that its net profit surged 33 % to a record 4.571 billion pounds last year, as strong gains by its investment banking units offset sharp increases to loans written off.
The 2006 result for Barclays — Britain’s third-biggest bank — was equivalent to 6.782 billion euros or 8.906 billion dollars and compared with its earnings in 2005.Barclays added that annual pre-tax profits jumped by 35% to 7.136 billion pounds — which beat analysts’ consensus forecasts of 7.025 billion.
Revenue climbed by a quarter to 21.595 billion pounds in 2006, compared with 17.333 billion the previous year.“Barclays had an excellent year in 2006," Barclays chief executive John Varley said in the earnings statement.
“Conditions in UK cards and consumer loans were difficult but Barclaycard UK consumer credit performance is beginning to improve. We are well positioned to deliver further growth in the years ahead," he added.Investment division Barclays Capital saw pre-tax profits rocket 55 % to 2.216 billion pounds as global financial markets made strong gains last year.
Asset management unit Barclays Global Investors meanwhile enjoyed a hefty 32% gain in pre-tax earnings to 714 million pounds.The record overall performance came despite a 37% surge in the bank’s impairment, or bad debt, charges to 2.154 billion pounds in 2006.
Pre-tax profits at Barclaycard tumbled 40 % to 382 million pounds as the credit card unit took a big hit from soaring bad debts and rising costs.Barclays share price shed 1.15 % to 772.5 pence in early afternoon trade amid concerns of an earnings slowdown at Barclays Capital (BarCap)— which is the group’s main growth driver.The FTSE 100 index, on which the bank is traded, showed a drop of 0.29 % to 6,425.0 points.“The rate of growth at BarCap is likely to slow, and is therefore likely to slow the group’s growth," Dresdner Kleinwort analyst Ian Gordon said.
British consumers are feeling the pinch from higher interest rates which have increased debt repayments and placed personal finances under greater strain over the past two years. Sector analysts expect an upsurge in bad debts at major banking groups.The Bank of England has hiked interest rates three times since August to the current level of 5.25 % as it seeks to combat rising inflation.Barclays is the first of Britain’s big banks to deliver its annual results.
The fifth-largest bank, Lloyds TSB, publishes its 2006 results on Friday. In the coming weeks, annual earnings are due also from peers HSBC, Royal Bank of Scotland and HBOS.
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