British bank Barclays Plc (BCS, BARC.L), in an interim management statement, said Tuesday that profit for the nine-month period declined sharply due to significantly higher impairment charges and other credit provisions. The company also noted that October trading was generally consistent with the overall trend for the first nine months of the year.
For the nine-month period, the company's profit before tax declined 19% to GBP 4.54 billion from GBP 5.59 billion in the previous year.
Profit for the period attributable to equity holders of the parent decreased to GBP 2.73 billion or 23.9 pence per share from GBP 3.82 billion or 54.7 pence per share in the same period last year.
Excluding a charge on own credit of GBP 1.3 billion, gains on acquisitions and disposals of GBP 178 million, and gains on debt buy-backs of GBP 1.25 billion, profit before tax increased 116% to GBP 4.41 billion from GBP 2.05 billion in the prior year. The prior-year number excludes a gain on own credit of GBP 1.95 billion, gains on acquisitions and disposals of GBP 1.59 billion, and gains on debt buy-backs of GBP 9 million.
Segment wise, Global Retail and Commercial Banking profit before tax for the nine-month period declined 30% to GBP 2.18 billion from GBP 3.11 billion in the same period a year ago. Global Retail and Commercial Banking income grew by 11%, mainly due to the international businesses following rapid expansion in prior years.
Investment Banking and Investment Management profit before tax dropped 38% to GBP 1.97 billion from GBP 3.15 billion in the comparable period last year. Income at Investment Banking and Investment Management for the nine months increased 32%, largely driven by the performance of Barclays Capital.
Head Office Functions and Other Operations pre-tax profit was GBP 395 million, compared to a pre-tax loss of GBP 664 million in the preceding year, driven by gains on debt extinguishment of GBP 1.16 billion, partially offset by increased costs in central funding activity.
According to the company, the current and prior-year periods include the results of Barclays Global Investors, which is being sold to BlackRock with completion anticipated during December 2009. Profit before tax attributable to the relevant discontinued operations for the nine months ended September 30 was GBP 435 million, compared to GBP 673 million in the year 2008 and the equivalent profit after tax was GBP 252 million, down from GBP 471 million in the prior year.
Total income, net of insurance claims, grew 26% to GBP 23.79 billion from GBP 18.83 billion in the year earlier, mainly due to the very strong income growth in Barclays Capital and the international businesses within Global Retail and Commercial Banking, which was partially offset by significantly increased impairment charges.
Operating expenses for the nine-month period increased 19% to GBP13.23 billion from last year's GBP 11.09 billion.
Impairment charges and other credit provisions increased 65% to GBP 6.21 billion from GBP 3.76 billion a year ago, about a quarter of this increase being attributable to foreign exchange movements. The company currently expects full year impairment to be around the bottom end of the previously referenced 2009 consensus range of GBP 9 billion - GBP 9.6 billion.
Annualized loan loss rate was 136 basis points, when measured against constant year-end loans and advances balances and constant foreign exchange rates, the company noted.
In addition, the company said it will pay an interim cash dividend of 1 pence per share in respect of the second half of 2009, on December 11, 2009. The company noted that a final cash dividend for the half year will be declared at the time of the preliminary results announcement on February 16, 2010 and will be paid in March.
For the third quarter, the company's profit before tax declined to GBP 1.56 billion from GBP 2.84 billion in the previous year. Profit after tax dropped to GBP 1.07 billion or basic earnings of 7.8 pence per share from GBP 2.33 billion or basic earnings of 29.4 pence per share in the same quarter last year.
Total income, net of insurance claims, for the quarter increased to GBP 7.53 billion from GBP 6.99 billion a year ago.
Impairment charges and other credit provisions for the quarter grew to GBP 1.4 billion from GBP 862 million in the preceding year.
John Varley, Group chief executive commented, "We have maintained strong income momentum in the third quarter, particularly in Barclays Capital and across the international activities of GRCB, enabling us to achieve consistent profitability across the first three quarters of 2009. This performance shows the resilience and diversification of our portfolio of businesses."
BCS closed Monday's regular trading at $23.17 on the NYSE.
BARC.L is currently trading at 335.65 pence, down 7.2 pence or 2.1%, on a volume of 31.11 million shares. In the past 52 weeks, the shares have been trading in a range of 47.3 pence - 390 pence on the LSE.
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