Barclays post lukewarm half-year results

Brian Benza
Staff Writer | Tuesday September 7, 2010 00:00

The bank, which has been receiving negative media attention around last week's resignation of MD Thuli Johnson lately, saw its usually strong performance in its retail banking being offset by higher costs and large increases in impairments.

Impairments grew by 34 percent to P 109.2 million, but were down 11 percent on a half-on-half basis. 'For the period, impairments grew considerably as tough economic conditions continue to put a stress on our customers,' Barclays says in a statement accompanying the results.

'Conditions remain difficult, but we have tightened credit policies and significantly increased our account monitoring and collections activities over the last year. 'We are seeing an improving trend in the first half of the year with impairment 11 percent lower than the second half of last year.' Net interest income was flat for the period, growing by a marginal 0.9 percent to P 493.7 million, resulting from a combination of declines of 17.6 percent and 41.8 percent in interest income and interest expense respectively. Total income came in flat as well, with a 35 percent increase in fee and commission income being offset by a similar decline (-31 percent) in net trading and other income.

Profit after tax declined by 11.2 percent to P 267 million, falling on the back of a 23.3 percent and 13.2 percent increases in staff costs and administrative expenses respectively.

The increase in staff costs was pinned on the upgrade of staff remuneration to market levels as a way of retaining key employees as well as the recruitment of a new team to manage relations in the corporate banking division.Despite a 5.3 percent decline in the income tax expense, the profit after tax decline was wider at 12.8 percent to P208.7 million. The custody business, which was classified as a discontinued operation owing to its impending sale to Stanchart, realised a P4 million profit during the period, bringing the total comprehensive income to P212.7 million.

The bank says its custody business is being sold for P104 million, which they believe could be distributed as dividend to shareholders.  An interim dividend of P0.12 was declared payable on October 18 2010.

The balance sheet grew by a marginal 0.4 percent to P11.8 billion on the back of a 2.3 percent decline in loans and 0.8 percent decline in customer deposits.  As a result, the loans to deposit ratio were 60.2 percent.  As the low interest rates environment persists, management say they have decided to shift attention towards the corporate banking segment for growth.

On outlook, the bank believes it will continue to recover steadily from the economic crisis and does not expect any significant change in performance trends or market conditions for the remainder of the year.