Barclays reported a further drop in profits at its powerhouse investment banking division yesterday after market conditions remained challenging.
The BarCap arm, which accounts for around 80 per cent of the company’s profits, saw top-line income drop 14 per cent in the third quarter, while profits stripping out accounting volatility fell 22 per cent on the second quarter to £765 million.
Across the group, a sharp reduction in bad debts meant third quarter pre-tax profits edged ahead eight per cent on the previous three-month period to £1.27 billion. The figure was down 28 per cent on the same quarter a year earlier.
John Varley, who will step down as chief executive in March after 14 years with Barclays, said: “Our income and profit performance was resilient for the first nine months of 2010 despite a subdued economic environment and moderate volumes.”
The slower performance at BarCap mirrors updates last week from Royal Bank of Scotland and HSBC as the sector faces up to weaker market activity.
In the UK retail banking division, profits were up by 20 per cent to £734 million across the nine months to September 30. This reflected a £100 million gain on last year’s acquisition of Standard Life Bank and a year-on-year improvement in bad debts as economic conditions continued to improve.
Mr Varley added: “We understand what is required of us to support private sector-led economic activity and have lent some £35 billion to UK households and businesses in 2010, an increase of over 30 per cent versus the same period in 2009.”
Barclays shares rose three per cent yesterday as analysts said the £1.27 billion profits figure for the third quarter came in ahead of expectations.
Comments from the bank also appeared to ease concerns that it will have to raise additional capital due to new regulatory requirements.
Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers, said the latest numbers sent some conflicting messages to investors.
He added: “The more recent updates from the bank have provided some concerns over the slowing earnings momentum at BarCap, which has suffered as with many other investment banking operations in the midst of the market’s volatility.
“Bulls of the stock will, however, maintain that this previously strong contributor to group profits is well positioned for any prolonged economic recovery, whilst the potential of the former Lehman unit has yet to make a sustained contribution.”