The FINANCIAL — Barclays PLC said on February 9 net profit fell 1%, helped by gains on acquisitions in a year in which it raised more than £12 billion ($17.77 billion) in new capital and lost over £8 billion on credit investments.
The U.K. bank said net profit was £4.38 billion, down from £4.42 billion in 2007. The results were well ahead of the £3.53 billion expected by analysts polled by Dow Jones Newswires.
Barclays benefited from a number of special items, including £2.41 billion on acquisitions, most of which was for Lehman Brothers Holdings' North American investment-banking operations. It gained £326 million from the disposal of its life insurance book, and booked £291 million in profits on the initial public offering of VISA and sales of shares in MasterCard.
In addition, the bank made £1.66 billion in gains on its own debt, helping to offset £8.05 billion in credit market and impairment losses.
Chief Executive John Varley said that while the acquisitions and disposals contributed to its profits, "the main driver of our results was a solid operating profit performance and record income generation."
Mr. Varley said in a conference call the bank remains committed to paying dividends in the second half of 2009. Barclays, along with U.K. banks Royal Bank of Scotland and Lloyds Banking Group initially announced a halt in dividend payments to protect capital ratios when it unveiled capital increases last fall.
Mr. Varley also defended Barclays' compensation policy, saying that it reflected adequately the performance of the group. He said that remuneration practices across the industry haven't been "reflective of the risk-taking," adding that Barclays is in discussions with other banks as well as U.K. authorities about what might be appropriate practice. Mr. Varley said the details will probably be discussed in the group's annual report.
In recent weeks, bank bonuses and compensation have been subject to increasing criticism in the media. U.K. Chancellor Alistair Darling announced that banks which received government help to raise capital, or banks that plan to use its toxic-asset insurance scheme, will have to limit bonus payments.
Barclays said revenue net of insurance claims rose 1% to €23.12 billion from €23 billion a year earlier. Net interest income, made on bread-and-butter lending business, rose 19% to €11.47 billion from €9.61 billion. Analysts had forecast a net interest income of €10.55 billion.
In late January, Barclays moved up the release of its 2008 earnings by eight days and repeated that it has no need to turn to the government or investors for fresh capital in a move aimed at restoring investor confidence after shares tumbled.
Mr. Varley issued an open letter, saying the bank would turn in a better-than-expected profit for 2008 despite £8 billion ($11.05 billion) in write-downs on souring investments. The letter followed nine consecutive days of declines in the bank's share price, amid fears over the financial health and the prospect of further nationalization of U.K. banks.
Early Monday, Barclays shares traded 10% in a flat London market. As of Friday, the stock is down 32% so far this year.