Barclays’ profits fall 33%
Barclays has revealed that profits in the first six months of the year fell by 34% after taking a £2.45 billion hit on investments linked to the credit crunch.
The UK’s third-largest bank made £2.75 billion in the first half of 2008, down from the £4.1 billion in the same period last year, but was ahead of analysts’ expectations.
But the bank’s investment arm Barclays Capital was among the worst hit areas of the business because of its exposure to risky assets, with pre-tax profits plunging 68% to £524 million. On the other hand, the bank’s credit card arm Barclaycard proved more resilient, posting the best performance of the business with a 30% increase in profit to £388 million.
Barclays’ results are roughly in line with HSBC, which earlier this week reported a 28% fall in profits. However Barclays has fared better than both Lloyds TSB and HBOS, which revealed slumps of 70% and 72% respectively.
However, Barclays’ chief executive John Varley admitted he was ‘disappointed’ with the bank’s results, and warned conditions will remain tough for the foreseeable future.
“The conditions in the market that we have seen over the course of the last 12 months are as difficult as we have experienced in many years,” he said. "Although I take some comfort from our relative performance in managing our risks and in generating income, a decline in profit of 33% is acutely disappointing as our shareholders have had to endure a lot.”
Shares in the bank have fallen by around 45% this year, and tumbled a further 1.7% in early morning trading to 363p - a fall of 6p.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.