A state-funded profit bonanza at Barclays

Barclays has reported record figures for 2009 this week. Annual revenues hit a record £31bn and overall pre-tax profits (boosted heavily by the sale of money manager Barclays Global Investor) were a record £11.6bn. Underlying pre-tax profits of £5.6bn were more than triple the 2008 figure. Almost half came from the group’s investment bank, Barclays Capital. Bad debts, although almost 50% higher at £8bn than for 2008, came in £1bn lower than expected.

What the commentators said

Amid all the hoo-ha over what a great performance this was, few remembered that taxpayers and the government are “propping up the Barclays bonanza”, said Simon English in the Evening Standard. Barclays may not have had a capital injection from the government, but it has benefited from the implied state guarantee behind major UK banks.

Then there’s the stimulus programme. Quantitative easing has boosted balance sheets, while near-zero interest rates mean Barclays’ cost of capital has been “slashed to as near zero as makes no difference”. Any business “able to borrow for nothing could make money simply by lending it out for slightly more”. Meanwhile, can we be certain that the bad debt problem is over? The bank thinks “the worst is behind it”, said The Independent’s David Prosser. If that’s true, “it will be quite an achievement, given the severity of the global downturn”.

BARC: 303p; 12m change 202%


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