Barclays profits soar by 8% to almost £3bn

Banking giant Barclays today reported an 8% rise in profits after a bumper six months for its investment banking arm.

Group pre-tax profits rose to £2.98bn (€3.5bn) in the half year to June 30 as the bank said it was “solidly profitable” in the period.

Barclays Capital – the firm’s investment banking division – posted a 100% increase in profits to £1.05bn (€1.2bn).

Meanwhile the retail banking arm saw profits down 61% to £268m (€316m) in a “challenging” economic climate.

Chief executive John Varley said: “The environment has remained very difficult in 2009 as a consequence of the onset during 2008 of economic recession in most parts of the world in which we operate.”

Staff costs increased 36% to £4.8bn (€5.7bn) and the bank said this was driven by a 32% rise in salaries and incentive payments, primarily in Barclays Capital. Barclays said this reflects the inclusion of the acquired Lehman Brothers' North American businesses.

The news comes after reports that executives at the division are in line for pay and bonuses worth an average £250,000 (€295,000) for six months’ work.

Remuneration is a thorny issue for banks after the British government bail-outs of last year and, although Barclays did not receive state aid, its policies will be scrutinised for signs of a return to the old days of high risk and big rewards.

Barclays Capital salvaged the investment banking business from the wreckage of failed Lehman Brothers and its strong performance reflects the benefits of the acquisition.

Mr Varley said: “Our strategy has helped us weather the crisis and we want our employees, customers and shareholders alike to continue to benefit from it over time.”

He expressed confidence that Barclays would remain profitable for the rest of the year.

“The trends that lie behind our operating performance in the first half of this year were again observable in July,” he said.

“We are realistic about just how difficult the environment is, and will remain, but we are committed to delivering another year of solid profitability through our continued emphasis on serving our customers and clients.”

Barclays managed to shore up its finances in the crisis without a government bail-out.

The bank instead turned to Middle East investors for funding and has also agreed the £8.2bn (€9.7bn) sale of its Barclays Global Investors fund management division.

Barclays’ shares fell to lows below 50p in the dark days of January, but have recovered to trade around 300p as fears of state intervention passed.