Barclays increased lending to individuals and raised loans to and fees from corporations. This helped the bank recover from a tumultuous year, which culminated in the resignation of chief executive Martin Taylor. Investors expect Barclays' new chief executive, Michael O'Neill, a former BankAmerica Corp executive, to reduce costs in the next three years.
"These numbers demonstrate that commercial banks like Barclays have a very good franchise. They can absorb the impact of new entrants and protect their profitability," said Nick Collier, an analyst at Morgan Stanley Dean Witter.
Barclays shares rose 11 per cent to a six-month high. Barclays chairman- designate Sir Peter Middleton, who will succeed Andrew Buxton as chairman in April, said Barclays Capital is not for sale and the investment bank could earn a 1999 operating profit of about pounds 265m.
"We're going to run it as a low-risk business, not nearly as risky as lending money," said Sir Peter, adding that the investment banking division has quit risky businesses such as trading securities for its own account after being forced to set aside pounds 250m to cover Russian losses.
He said the bank's costs will be stable this year and will show big reductions in the next three years. In November 250, or 5.6 per cent, of the investment banking unit's staff were fired, and Barclays said it will reduce costs in its credit card business by 15 per cent over three years.
"The results showed that the recession is unlikely to be severe," said Charles Maisey, director of Quilter & Company. "Whereas last autumn everybody expected the worst, it now doesn't look so bad."Reuse content