Barclays 2008 pre-tax profit tops £6 billion but group bonuses halved

Barclays said bonus payments across the bank would almost halve for 2008 as it reported a 14 per cent drop in annual profit and said it faces a tough year ahead.

Its profit beat expectations, however, and the bank's shares jumped over seven per cent in early trading yesterday.

Barclays said it expected 2009 to be "another challenging year" with credit market losses set to shrink but bad debt charges likely to rise as recession takes its toll.

"2009 will be another tough year. In 2008 we've had a crisis in the banking system; the principal issue for 2009 is going to be rapid economic slowdown, in a sense a more familiar but nonetheless (a) pretty brutal slowdown in economic growth all around the world," said Barclays chief executive officer John Varley.

The UK economy was likely to contract by at least two per cent this year, he said.

Barclays had had a good start to the year with the performance of its Barclays Capital investment bank arm "extremely strong", the group said. It plans to restart paying dividends in the second half of this year.

The bank reported a 2008 pretax profit of £6.1 billion, down from £7.1 billion in 2007 but greater than an average forecast of £5.8 billion from 13 analysts polled by Reuters Estimates, since new profit guidance was issued on January 26.

The figure included £8 billion in gross writedowns and bad debts, or a £5 billion net writedown after gains on the valuation of debt it carries on its books.

Profit included £2.4 billion in gains on acquisitions, most related to its purchase of Lehman Brothers' US business.

Its equity tier one ratio was 6.7 per cent at the end of the year, up from 5.1 per cent a year earlier, which it said gave it a cushion to absorb rising bad debts.

"We do not need more capital," Mr Varley told reporters on a conference call.

"These ratios are well ahead of the minimum required by the Financial Services Authority, and create a substantial loss-absorption capability."

He said bonuses across the group would be down 48 per cent from 2007, with the fall in Barclays Capital and Barclays Global Investors bigger than that.

By 8.20 a.m. Barclays shares were up 6.4 per cent at 111.5 pence, the biggest risers in the FTSE 100 share index.

Barclays shares have endured a roller-coaster ride this year, slumping to a 24-year low of 47.3 pence last month but more than doubling since. They are still down 27 per cent this year.

The bank has stayed out of state hands - unlike rivals Royal Bank of Scotland and Lloyds Banking Group - but in the past year it has sold big stakes to investors in Qatar, Abu Dhabi, Singapore, China and Japan, angering many traditional shareholders.