Bad Debt Weighs on Barclays Earnings

Banking group Barclays PLC on Tuesday reported strong earnings in its investment banking unit and announced the restart of dividend payments, but also warned that the bad debts weighing on its profits have not yet peaked.

Barclays, Britain's biggest bank and one of the few to rebuff a taxpayer-funded bailout, said net profit fell 29 percent in the first nine months of the year to 2.73 billion pounds ($4.55 billion), down from 3.83 billion pounds a year ago.

The decline was largely due to a 65 percent surge in impairment charges — write-offs on the value of assets — to 6.21 billion pounds as economies remained fragile and unemployment rose.

Finance Director Chris Lucas said the bank now expects charges for the full year to be at the lower end of its previously forecast range of 9-9.6 billion pounds

Lucas acknowledged that charges were likely to worsen again due to a seasonal uptick in the final quarter. He added that it was too early to say whether they would increase further in the first quarter of 2010, although there were some positive trends in the key U.S. employment and housing markets.

Shares in the bank, which initially rose after the trading update, were pulled lower on the uncertain outlook, dropping 2.2 percent to 335.4 pence.

Barclays has emerged from the financial crisis as one of the country's strongest banks after shunning a government bailout taken up by Royal Bank of Scotland PLC and Lloyds Banking Group PLC.

While Barclays' underlying pretax profit — stripping out bad debt provisions and other one-off factors — more than doubled over the nine months to 4.4 billion pounds, both RBS and Lloyds are expected to post major losses this year.

Barclays said Tuesday that its relatively firm financial state had allowed it to announce its first dividend since the crisis hit — a one penny payout to shareholders for the second half of the year.