Barclays reports fall in first-quarter profits

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The Independent Online

Banking group Barclays said today first quarter profits were down on last year after a sharp decline at its investment banking arm.

Chief executive John Varley said results from the group's retail and commercial banking increased year on year during the first three months of 2008, but that its Barclays Capital arm was well down on last year's strong showing.

In a statement released ahead of the group's annual general meeting today, he said overall trading during January and February had been in line with 2007 but "tougher" conditions in March dragged the quarter down.

Barclays has been tipped to follow rival Royal Bank of Scotland and raise new capital from investors to bolster its balance sheet amid the credit crunch.

Mr Varley made no explicit statements about the need for extra funding but said: "We will remain active managers both of our balance sheet, and of our capital ratios."

He also alluded to the difficult times being faced by banks but said there was a need for a sense of perspective. "It's very important that risk management doesn't become risk aversion," he said.

Mr Varley said the group ended 2007 with an equity ratio - which measures how well-capitalised a bank is - of 5.1 per cent, below the target of 5.25 per cent. He said he wanted this ratio to rise to 5.25 per cent "in time".

The chief executive added that the group had been actively managing the capital base over the past few months. "We will remain active managers both of our balance sheet, and of our capital ratios," he said.

In February the group posted profits of £7.08 billion for 2007, but revealed a £1.6 billion hit from the credit crunch and warned of "at least" another six months of turmoil.

In his AGM statement, Mr Varley said the second half of 2007 was "as hard a six month period as I can remember", with conditions in some markets in 2008 "remaining difficult".

But he added: "We must maintain a sense of perspective. Interest rates are moving lower. Employment is high. World economic growth this year will be between 3 per cent and 4 per cent again. Governments and central banks around the world are showing their determination to help the financial system recover."

Like other major banks, Barclays' share price has nearly halved over the past year.

Mr Varley said: "I'm disappointed that our stock price performance has been poor over the last twelve months.

"We can't control the price at which the stock trades, but that doesn't prevent me empathising with shareholders.

"So we must create the conditions in which the stock price can move ahead again, and concentrate on what we can control - which is the profit performance of the group."

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