Barclays to reinstate dividends
Barclays is planning to restart dividend payments next month despite rising bad debts knocking its profits in the first nine months of the year.
The banking giant says that pre-tax profit for the nine months to September came in at £4.54 billion, down from the previous year’s £5.6 billion. However, when the proceeds from the sale of Barclays Global Investors’ asset management arm to BlackRock are included, Barclays is on track for a record-breaking year.
Its pre-tax profit for the three months to 30 September stood at £1.56 billion – more than triple the £482 million it reported at the same time last year when the financial world was in full blown crisis.
Bad debts, however, continued to pose a headache for the UK’s second largest bank, hitting £6.2 billion during the nine-month period, a steep rise from £3.8 billion a year ago as the number of borrowers defaulting on loans climbed in the recession.
However, impairment charges dropped back slightly in the third quarter, standing at £1.4 billion between July and September – down from £1.8 billion for the previous three months.
Profit excluding gains on acquisitions, debt buybacks and other one-off items more than doubled to £4.4 billion, the bank reports.
Barclays says it now expects writedowns for the full year to be around the bottom end of the previously referenced 2009 consensus range of £9 billion to £9.6 billion.
John Varley, group chief executive, says: “We have maintained strong income momentum in the third quarter, particularly in Barclays Capital and across the international activities of Global Retail & Commerical Banking, enabling us to achieve consistent profitability across the first three quarters of 2009. This performance shows the resilience and diversification of our portfolio of businesses."
Its investment banking arm, boosted by the acquisition of the core operations of Lehman Brothers last year, managed to double its income levels to £14.2 billion – fuelling speculation over the size of this year's bonus pot.
Pre-tax profit came in at £1.4 billion – down 38% on a year ago but this figure would have been £2.7 billion without the £1.3 billion charge on its own credit.
In contrast, conditions remained tough in the UK retail banking sector with profits for the nine months down “significantly”.
This falls under the global retail and commercial banking arm where pre-tax profit before tax declined to £2.1 billion compared with £3.1 billion last time.
Last week, Barclays announced plans to break up this division headed by Frits Seegars. The new corporate and investment banking (CIB) and wealth management arm will be made up of Barclays Capital, Barclays Commercial Bank and Barclays Wealth.
Meanwhile, a division to be called Global Retail Banking (GRB) and comprising UK Retail Banking, Barclaycard and the former GRCB Western Europe and Emerging Markets businesses, will be led by Antony Jenkins.
Barclays is planning on paying a dividend of 1p a share on 11 December. It is also planning on paying a final cash dividend for the year in February although it warned that the proportion of profits distributed through dividends will be significantly lower than the 50% of recent years.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.