Barclays FY08 profit declines; suspends executive directors' 2008 bonuses - update

(RTTNews) - UK-based financial services firm Barclays Plc (BCS | Quote | Chart | News | PowerRating) Monday reported a decline in its fiscal 2008 profit, hurt by market losses and impairment charges amid ongoing slump in global credit markets. The bank said its executive directors will receive no bonuses for 2008 and it plans to resume dividend payments during the second half of 2009. Going ahead, the bank expects 2009 to be another challenging year.

For fiscal 2008, Barclays reported profit attributable to equity holders of the parent of GBP 4.38 billion, or GBP 57.5 pence per share, compared with GBP 4.42 billion, or GBP 66.7 pence per share, a year ago.

Pre-tax profit declined 14% to GBP 6.08 billion from GBP 7.08 billion last year. Economic profit for the year was GBP 1.76 billion, compared with GBP 2.29 billion in the previous year.

During the year, the bank's impairment charges and other credit provisions totaled GBP 5.42 billion, a 94% upside from the previous year. The impairment charges included GBP 1.76 billion arising from US sub-prime mortgages and other credit market exposures.

Profit after tax increased 4% to GBP 5.29 billion, reflecting lower effective tax rate primarily due to the gain on the acquisition of Lehman Brothers North American businesses of GBP 2.26 billion, in part being offset by carried forward US tax losses attributable to Barclays businesses.

Net interest income rose to GBP 11.47 billion from GBP 9.61 billion a year earlier. Net fee and commission income reached GBP 8.41 billion, higher than GBP 7.71 billion last year.

Total income reached GBP 23.35 billion, down from GBP 23.49 billion in fiscal 2007. However, income net of insurance claims edged up 1% to GBP 23.12 billion from GBP 23 billion a year ago.

Business segment wise, UK Retail Banking's full-year income rose to GBP 4.52 billion from GBP 4.34 billion last year, reflecting strong growth in Home Finance and minimal settlements on overdraft fees.

Barclays Commercial Bank also posted higher income of GBP 2.75 billion, compared with GBP 2.56 billion in the previous year, mainly reflecting increased sales of treasury products. Barclaycard reported total full-year income of GBP 3.23 billion, down from GBP 2.54 billion in the previous year.

Income in Global Retail and Commercial Banking was up 17%, while income in Investment Banking and Investment Management declined 19%. In Western Europe, Global Retail and Commercial Banking's income net of insurance claims rose 53% to GBP 1.43 billion, driven by very strong growth in deposits, mortgages and commercial lending across the expanded franchise, as well as gains of GBP 82 million relating to the Visa IPO and the sale of MasterCard shares.

The segment's income grew 91% in emerging markets to GBP 1.02 billion, driven by retail expansion in India, entry into new markets in Russia and Pakistan and strong performances in Africa, as well as gains of GBP 82 million relating to the Visa IPO and sale of MasterCard shares. Further, helped by higher fees and commissions as well as a gain relating to the Visa IPO, Absa's total income net of insurance claims grew 10% to GBP 2.2 billion in fiscal 2008.

Meanwhile, Barclays Capital was affected by very challenging market conditions in 2008, with income falling 27% to GBP 5.23 billion, reflecting gross losses of GBP 6.29 billion relating to credit market assets. These losses were partially offset by gains of GBP 1.66 billion on the fair valuation of notes issued by Barclays Capital due to the widening of credit spreads and GBP 1.43 billion in related income and hedges. Excluding credit market related losses, gains on own credit and related income and hedges, income in Barclays Capital increased 6% for the year.

Barclays Global Investors reported a 4% decline in total income to GBP 1.84 billion due to lower incentive fees. Barclays Wealth generated full-year income net of insurance claims of GBP 1.32 billion, a 3% rise year-over-year, demonstrating strength in customer deposits and lending, partially offset by the impact of lower equity markets on fee income.

"In a very difficult economic environment in 2008, Barclays has steered a course that has enabled us to be solidly profitable despite strong headwinds. We are well positioned to maintain Barclays competitive strengths through the undoubted challenges that will come in 2009 and beyond," said Barclays Chairman Marcus Agius.

The bank said it intends to recommence dividend payments during the second half of 2009. Thereafter, dividend payments will be made on a quarterly basis. The bank will set out its dividend policy at the Annual General Meeting in April.

Barclays also said that it had a good start to 2009, with high levels of customer and client activity in the first month of 2009. In particular the operating performance of Barclays Capital, benefiting from the now complete integration of the Lehman Brothers North American businesses, was extremely strong.

Looking forward, the bank expects 2009 to be another challenging year with continuing downturns or recessions in many of the economies. The bank also sees further charges on its assets in 2009, but gross write-downs will be lower than the levels of 2008.

BCS closed Friday's trading at $6.29. On the LSE, BARC.L is trading at 113 pence, up 8.20 pence, on a volume of 53.22 million shares.

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