Jobs threat as Barclays prepares for slow growth

Bank's quarterly pre-tax profits rose 5 per cent but mainly due to cost-cutting and reduction of bad debts

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The Independent Online

Barclays yesterday warned that market conditions would stay tough and that further job cuts could be in the pipeline at the bank as it unveiled stronger-than-expected results for the third quarter.

Bob Diamond, Barclays' chief executive, said: "A number of market conditions this year have been challenging and we would expect that to continue some way into next year given the weaker economic growth we have seen."

He added that the bank was now planning for slower economic growth across Europe than it had expected.

Barclays' adjusted pre-tax profits rose 5 per cent to £1.34bn in the three months ended 30 September from a year earlier. The group figure excludes one-off items including a £2.9bn accounting gain on the reduced value of Barclays' own debt and a £1bn charge for settling complaints about sales of payment protection insurance.

However, income fell 3 per cent and the bank relied on cost cutting and bad debt reduction to increase group profit. Income at the bank's flagship Barclays Capital investment banking arm fell in the third quarter and adjusted profit more than halved to £388m. UK retail and business banking more than doubled profit to £494m but most of the gain was from cost cuts and falling bad debts.

Barclays has cut 3,500 jobs this year, already exceeding the 3,000 figure the bank had forecast for all of 2011.

Without being specific on timing, Mr Diamond said: "The kind of trends [seen] this year you should expect to see continue."

Mr Diamond said he was "absolutely committed" to his 13 per cent target for shareholder returns by 2013, which he set in February when markets were calmer. His finance director, Chris Lucas, said the bank's ability to beat its £1bn target for slashing expenses would help Barclays hit its target for shareholder returns.

Mr Diamond said the results showed that Barclays' model of combining retail and investment banking worked and that retail banking was compensating for BarCap's temporary weakness. He said he "felt pretty good about our [BarCap's] relative performance" because profit had fallen less than at rivals in tough conditions.

Mr Diamond said last week's deal to support the euro had a "calming" effect on markets but that there could be further trouble ahead and the bank expected slower economic growth next year.

Barclays and other UK banks have seen their shares battered in recent months on fears they would be hit by big write-offs if Greece or other eurozone countries defaulted on their debts. Mr Diamond said yesterday Barclays' capital position was "rock solid" and added: "We have no need for additional equity capital".

Ian Gordon, a banking analyst at Evolution Securities, said: "We knew that Q3 wouldn't be pretty but this ranks as a thoroughly respectable performance."

Mr Diamond said that the US, Europe and the UK were all grappling with how to boost growth while cutting their budget deficits.

Britain's banks have been attacked for not lending to businesses but Mr Diamond insisted that even successful firms were holding on to cash instead of investing because they were fearful. "The corporate sector is very strong and they really need some confidence," he said.

Barclays shares fell 5.9p to 195.3p.

Deft dealing cuts exposure to eurozone

Barclays maintained its reputation for deft market deals by slashing its exposure to troubled eurozone countries by almost a third in the third quarter of this year. The bank's exposure to the sovereign debt of Spain, Italy, Portugal, Ireland and Greece fell 31 per cent to £8bn. Barclays reduced its holdings as fears mounted that a default by Greece would trigger further defaults in other indebted countries. The bank cut its Spanish sovereign exposure by 43 per cent and its holdings of Italian government bonds by 24 per cent. Exposure to Gerek sovereign holdings is just £23m. Barclays used canny deals such as raising capital from Qatar and moving troubled assets off its balance sheet to ride out the financial crisis.