Barclays unveils record profits
Barclays has kicked off the UK banking sector results season with a 92% rise in full-year profits to £11.6 billion.
This record high was given a substantial boost from the sale of its Barclays Global Investors fund management business to Blackrock last year and a stellar performance from its investment banking arm Barclays Capital.
However, stripping out the effects of a £6.3 billion gain on the sale of its asset management, profits stood at £5.6 billion.
Chief executive John Varley says: "Our record income performance produced a sharp increase in underlying profitability in 2009. We have strengthened our financial position considerably over the year in the areas of capital, liquidity and leverage and are well positioned to manage further changes that may be required of us by our regulators."
Total income shot up 34% to just shy of £31 billion with its global retail and commercial banking division enjying a 7% rise to £16 billion. Barclays Capital continued to be the star performer, with income levsls up 81% to £17.9 billion following very strong performances across client franchises in the UK and Europe and a revamp of its US operations.
Pre-tax profits in the division increased 89% to £2.46 billion.
However, bad debts continued to make their presence felt, up 49% to £8.07 billion although Barclays said this was in line with expectations. These are expected to rise further in some parts of the business in 2010 before dropping back.
The UK's third largest bank, which did not accept any type of government aid during the height of the credit crisis, says it is paying out £1.5 billion in cash bonuses.
It will also fork out a further £1.2 billion in three-year bonuses which will be subject to claw back if conditions are not met.
The average bonus at Barclays, which has 144,000 staff, was £19,000 while the average bonus received by the 23,000 bankers at Barclays Capital was £95,000.
This means it will pay out £190 million to the government through the new bonus tax.
However, chief executive Varley and Barclays Capital boss Bob Diamond both turned down their bonuses for a second consecutive year.
Shareholders will receive a final dividend of 1.5p a share, taking the total for the year to 2.5p.
David Buik, economist at BCG Partners, says: "These mind-blowing brilliant results from Barclays is a total vindication of the board's plans in the last 18 months. Barclays have resisted capital from the government; it has passed the Treasury's stress test resulting in non participation in the government's asset protection scheme.
"At the same time it has had its expensive capital injected, mainly from Qatar, but the alternative at the time was unthinkable. The purchase of Lehman New York was inspirational. That move alone took significant competition off the street, which attracted business that otherwise, may not have gone Barclay's way in the field of investment banking."
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.