Barclays banks lower profits due to credit crunch
LONDON, Feb 19, 2008 (AFP) — Barclays, Britain's third-biggest bank, said on Tuesday that net profits sank in 2007 owing to fallout from the US subprime housing crisis and the related global credit squeeze.
Commercial banks around the world have suffered heavy losses connected to securities that were backed by home loans given to US homebuyers with risky credit histories.
Since last August, the US subprime housing crisis has sparked a so-called credit crunch as banks became jittery about lending cash to each other.
Barclays revealed on Tuesday in a results statement that its investment arm Barclays Capital took a hit of 1.635 billion pounds (2.16 billion euros, 3.19 billion dollars) in 2007 from the squeeze on global credit.
That was significantly higher than the previous estimate of 1.3 billion pounds given in November.
As a result, net profits dropped by about 3.0 percent to 4.417 billion pounds in 2007, compared with the performance in 2006.
"Barclays delivered a resilient financial performance in 2007 in a year of contrasting market conditions," said chief executive John Varley in comments accompanying the release.
"The excellent results of the first half were achieved in a relatively benign environment; in the second half we were not immune from the impact of the credit market turbulence."
Sales grew 8.0 percent to 23.492 billion pounds. Pre-tax profit slid 1.0 percent to 7.08 billion pounds last year, but that beat analysts' consensus forecasts for profit of 6.99 billion.
Despite sliding profits, Barclays' share price bounced higher after the bank hiked its annual shareholder dividend by 10 percent to 34 pence per share.
In mid-afternoon trade, Barclays' share price reversed earlier losses to gain 4.57 percent at 481 pence on London's rising FTSE 100 leading shares index.
Looking ahead, Barclays said it would weather ongoing turbulence on world financial markets that would probably herald slower economic growth in certain key markets.
"In many economies of the developed world, there will be a slow-down (in 2008), and in particular we expect economic growth in the UK and the US to be below the trend of recent years," Varley said.
"In an environment such as this we will have to be disciplined in our risk management and rigorous in our approach to lending.
"But our experience of 2007 gives us confidence, and we enter 2008 with a strong capital base, a consistent strategic direction, a well diversified set of businesses and significant opportunities for growth in the medium term."
Last year, meanwhile, Barclays lost out to British rival Royal Bank of Scotland in a mammoth takeover battle for control of Dutch banking titan ABN Amro.
