Barclays, the British banking group that Gulf investors helped rescue last year, has reported a 10 per cent rise in first-half profits.
Barclays returns to solid ground with 10% profit rise
Barclays, the British banking group that Gulf investors helped rescue last year, has reported a 10 per cent rise in first-half profits. The figure was below analyst expectations as a result of large provisions for bad loans, as the bank prepares for a possible increase in defaults of 73 per cent to £3.9 billion (Dh24bn) compared to the first half of last year. Provisioning for loans to retail bank customers doubled from last year as credit card defaults increased. Loan volume decreased slightly. Despite these weaker-than-expected results, Barclays appears to be on increasingly solid financial footing after Gulf investors made it one of their most high-profile investments during the financial crisis last year. Investors from Abu Dhabi and Qatar put £5.8 billion into the bank, helping it avoid a government lifeline. Abu Dhabi's investment, made by the International Petroleum Investment Company, netted a profit of over £2bn in June when it sold some of the bonds Barclays issued as part of the rescue. The emirate could still own around 5 per cent of the bank if it exercises options connected to Barclays debt. Barclays recorded its half-year profit of £1.89bn thanks largely to strong revenues from its investment banking business. It also booked profits from its acquisition of the operations of Lehman Brothers, a major US investment bank that went bankrupt last year. "The investments we have made, particularly in our international businesses, are driving very strong income performance and allowing us to absorb the consequences of the economic downturn," John Varley, Barclays' chief executive, said. But while profits may have risen in the first half, Mr Varley said he expected the rest of the year to be challenging. "The environment has remained very difficult in 2009 as a consequence of the onset during 2008 of economic recession in most parts of the world in which we operate. But we were nonetheless solidly profitable," he said.