Bloomberg News

Barclays Quarterly Profit Climbs on U.K. Consumer Unit Gains

November 01, 2011

(Updates with closing share price in eighth paragraph.)

Oct. 31 (Bloomberg) -- Barclays Plc, Britain’s second- biggest bank by assets, reported a quarterly profit that beat estimates as earnings at the U.K. consumer bank more than doubled and investment bank revenue declined by less than European peers.

Pretax profit before debt valuation adjustments in the three months to Sept. 30 increased by 5 percent to 1.3 billion pounds ($2.1 billion) from 1.27 billion pounds a year earlier, the London-based company said in a statement today. That beat the 1.24 billion-pound median estimate of 10 analysts surveyed by Bloomberg. Revenue at the Barclays Capital investment banking unit fell 15 percent to 2.25 billion pounds in the period.

“It has been a period of considerable challenge and uncertainty,” said Chief Executive Officer Robert Diamond, 60, on a conference call with journalists. All but one unit performed better than the prior and year-earlier periods, he said, and it was “no surprise” that investment banking was the exception.

Europe’s sovereign debt crisis crimped investment banking earnings as revenue from trading and bond underwriting fell. Deutsche Bank AG said pretax profit at its securities unit tumbled 94 percent in the third quarter, while UBS AG reported a 31 percent revenue decline at its investment bank.

“Barclays has bucked the trend of a broadly weaker market after an update which has exceeded expectations,” said Richard Hunter, head of equities at Hargreaves Lansdown Plc in London. “The diversity of Barclays’ operations is playing out as planned, as certain units of the bank take up the slack from the underperformers.”

Increase Revenue

Barclays said in June it would seek to increase revenue by as much as 6.4 billion pounds by 2013, with more than a third coming from its securities unit. Revenue rose to 9.88 billion pounds in the period, from 6.29 billion pounds in the year earlier period.

U.K. consumer-banking pretax profit more than doubled to 494 million pounds in the third quarter. In Europe, the retail division swung to a profit of 52 million pounds after five quarters of losses. Pretax profit at Barclaycard, the credit card unit, rose 55 percent to 378 million pounds.

“Capital markets remained difficult in October, but have shown some improvement since the announcement by euro area leaders last week,” the bank said in the statement. “Our retail, corporate and wealth businesses have performed broadly in line with their underlying run rates for the first nine months of the year.”

Shares Rise

Barclays stock fell 2.9 percent to 195.3 pence at the close of trading in London, the eighth-best performer among the 46 members of the Bloomberg Europe Banks and Financial Services index.

“Some not-too-bad news from Barclays has been welcomed by the market,” said Gary Greenwood, a banking analyst at Shore Capital in Liverpool. “Expectations were pretty low given what some of the other banks have reported.”

The U.K. lender cut its investments in Greece, Ireland, Italy, Portugal and Spain by 31 percent to 8 billion pounds by the end of the third quarter. Within that total, the bank cut its holdings of Spanish government debt by 43 percent to 2.7 billion pounds and Italian sovereign debt by 24 percent to 4.1 billion pounds in the period.

The bank said it’s generating sufficient capital for its business needs and doesn’t intend to raise new equity capital. The lender’s core Tier 1 capital ratio, a measure of financial strength, remained at 11 percent in the quarter.

3,500 Job Cuts

“Our profits before tax have been generated equally across our retail and investment banking businesses, showing the diversity and balance of Barclays,” Diamond said in the statement.

The bank said that it had already eliminated 3,500 jobs this year, ahead of its August prediction that it would remove 3,000 posts. The banks was “on track” to exceed its 1 billion pound cost-reduction package, Finance Director Chris Lucas said.

Diamond reiterated the bank’s target to gain a return on equity, a measure of profitability, of 13 percent by 2013.

--Editors: Francis Harris, Jon Menon

To contact the reporters on this story: Howard Mustoe in London at hmustoe@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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