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 more a familiar but nonetheless (a) pretty brutal slowdown in economic growth all around the world," said Barclays Chief Executive John Varley.
The UK economy was likely to contract by at least 2 percent 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 pounds, down from 7.1 billion in 2007 but ahead of an average forecast of 5.8 billion from 13 analysts polled by Reuters Estimates, since new profit guidance was issued on January 26.
Its equity tier 1 ratio was 6.7 percent at the end of the year, up from 5.1 percent a year earlier, which is said gave it a cushion to absorb rising bad debts.
"We do not need more capital," 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."
Cantos interview 9/2/09: John Varley's comments
Well, we need to recognise that the year's only a month old, so I caveat my response by making that qualification. But I am pleased actually with how we've started 2009. We've seen very high levels of customer and client activity in the first month of the year. It's very clear to us, for example, that Barclays Capital is benefiting from the now complete integration of our new Lehman's business, and we've seen good activity levels in Barclays Capital. And similarly across the Global Retail and Commercial Banking businesses the same sort of trends that we were seeing in 2008, where GRCB performed well, are observable in the first weeks of the year.
Chairman Marcus Agius said the business had remained solidly profitable despite strong headwinds, in what was a very difficult economic environment. He said the bank intended to start paying a dividend again in the second half of 2009.
Varley: 'Although we have been careful over recent years to avoid inappropriate risk concentration in our major loan books in retail and commercial banking, our plans for 2009 assume that impairments will continue to be at a high level.'
Telegraph 9/2/09
Bob Diamond ...said the scepticism about Barclays' approach to valuing its assets was driven by "uninformed rhetoric". He added: "It is hugely frustrating to hear this noise". Mr Diamond said the acquisition of Lehman was "game changing". The bank had held back from bidding for the whole of Lehman because of the huge overlap with its business in Europe, so when the opportunity arose to buy just the US business it was "almost too good to be true," Mr Diamond said. The deal would enable Barclays to take advantage of major opportunities such as helping governments raise money.
Independent 9/2/09
http://www.independent.co.uk/news/business/news/barclays-scraps-directors-bonuses-1604727.html
Collins Stewart analyst Alex Potter said: "The outlook statement makes for grim reading, alluding to downturns and recessions."
Although Barclays expects an overall decrease in the gross £8.1 billion in writedowns it saw in 2008, it anticipates that impairments as a percentage of its loans could rise to between 1.3 per cent and 1.5 per cent.
Based on 2008's loans and advances of £510 billion, this could imply bad debt charges of more than £7 billion this year.
