Barclays bank says 1Q net profit up 12 percent

[May 07, 2009]  LONDON (AP) -- Barclays PLC, the British bank that stood apart from its peers by shunning a government bailout, on Thursday posted a sharp rise in first-quarter net profit after its investment banking profits surged from the acquisition of U.S. assets of bankrupt Lehman Brothers.

That helped the bank absorb steep 79 percent increase in write-offs on bad investments due to the financial crisis, but it warned that the economic environment will lead to further asset quality declines -- albeit at a slowing rate -- over the rest of the year.

Net profit rose 12 percent in the three months to the end of March to 826 million pounds ($1.25 billion), compared to 736 million pounds in the first three months of 2008.

Revenue soared 42 percent to 8.15 billion pounds.

The bank's shares received a small boost from the results, rising 1.8 percent to 293.25 pence in midmorning trade on the London Stock Exchange, although some analysts focused on the anticipated future deterioration in impairment charges.

"Overall, we haven't seen much to change our views that the strong first-quarter trading performance will prove unsustainable, leaving Barclays and the rest of the banks vulnerable to further rises in impairments," said Sandy Chen, analyst at Panmure Gordon & Co.

Impairment charges and other credit provisions rose to 2.3 billion pounds compared to 1.3 billion pounds a year earlier, a rise it said was in line with expectations.

Barclays chief financial officer Chris Lucas acknowledged that loan loss rates were likely to be at the top end of the bank's forecast of between 130 to 150 basis points this year -- up from around 95 basis points last year.

However, he added that while the rate was likely to rise throughout the year, he expected the pace of the rise to slow toward the end of the year.

"I think it's too early to declare an improvement, but you might declare a reduction in the deterioration," he said, when asked if the slowing reflected a turn for the better in the economic situation.

Barclays declined to take part in a multibillion pound bailout of the struggling British banking system last year alongside Lloyds Group and Royal Bank of Scotland, instead raising 7 billion pounds from Middle Eastern investors and agreeing to sell its iShares fund management business to raise 3 billion pounds.

Barclays also decided, after passing a "stress test" of its assets by regulators, not to participate in the government's Asset Protection Scheme to underwrite potential losses on toxic assets.

The bank announced last month that had agreed to sell its U.S.-based asset management business iShares to European private equity firm CVC Capital Partners Group, booking a net gain of $2.2 billion from the sale.

However, under a so-called "go-shop" clause in the deal, it has until June 18 to find a better offer for iShares, or an offer for Barclays Global Investors as a whole. Lucas declined to comment on the deal on Wednesday.

Pretax profit from investment banking was up 189 percent to 1.05 billion, reflecting the Lehman Brothers acquisition. However, that purchase was also a major factor in driving operating expenses up 37 percent to 4.46 billion pounds.

Pretax profit from retail and commercial banking fell 45 percent to 586 million pounds.

Trading in April was in line with February and March, following an "exceptional" January, the bank said.

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On the Net:

http://group.barclays.com/

[Associated Press; By JANE WARDELL]

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