Barclays profits hit £3.95bn on investment banking

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Barclays branch sign
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Barclays said it had delivered "good growth" in income and profits

UK banking giant Barclays has reported pre-tax profits of £3.95bn for the first half of 2010 - up 44% on the same period last year.

The vast majority of the profits came from the bank's investment banking arm, Barclays Capital, which made £3.4bn.

Barclays also said it lent £18bn to UK households and businesses over the six month period.

Earlier this week rival HSBC reported first-half profits of £7bn, while Lloyds made £1.6bn.

Royal Bank of Scotland will announce its results on Friday.

'Social responsibility'

Barclays chief executive John Varley said his bank had performed well in difficult market conditions.

"Against the backdrop of of subdued economic and market activity and the sovereign debt storm of the second quarter, we have delivered good growth in income and profits," he said.

Mr Varley was keen to stress the efforts the bank had gone to in lending to people and businesses.

"We recognise our wider social responsibility as an enabler of economic growth and prosperity, and our actions are - and will continue to be - informed by this duty," he added.

Before the major banks began reporting this week, Chancellor George Osborne sought to put pressure on banks to lend more and support the economic recovery.

Gross new lending totalled £18bn, Barclays said, including about £10bn advanced to households and small businesses.

A further £7bn of lending was taken on with the acquisition of Standard Life Bank at the beginning of the year.

Barclays could not provide a figure for net lending, however. The BBC's business editor Robert Peston said there was "no evidence" to suggest that Barclays was doing more to help the economy than other major banks.

"Stripping out the impact of the takeover of Standard Life Bank and of Barclays' increased market share of mortgage lending, loans to retail banking customers - which include small business customers - were broadly flat over the past six months," he said.

"And in corporate banking, which serves medium-size companies, loans and advances to customers in the UK and Ireland fell over the same period... because of what the bank describes as 'lower customer demand'."

Bad debts

Barclays was heavily reliant on investment banking in the first six months of the year, with Barclays Capital's £3.4bn accounting for more than 80% of overall profits.

The profit figure for Barclays Capital included a one-off £851m gain on the value of its own credit. Stripping this out, profits at the investment banking arm came in at £2.55bn.

Retail banking profits came in at £901m, up from £845m on last year. Meanwhile profits at Barclaycard fell 15% to £317m.

Losses on bad debts fell 32% to just over £3bn, though the bank said impairment charges in Spain - which indicate a reduction in the value of its assets - had increased.

Robert Peston said the fall in impairments would have had a significant impact on profits.

"With substantial profits of £3.9bn it's very difficult to argue that Barclays is doing badly," he said.

"But if you strip out the fall in the charge for bad debts, it's difficult to see that in underlying operational terms there's much growth.

"But we are living in a world of low growth and, in pure income terms, this bank is not doing much better than the wider British economy."

Investors were similarly downbeat over the results, with Barclays shares falling 3% in morning trade.

"The reliance on the investment banking operation, where progress has slowed, continues to cast something of a shadow over the shares," said Richard Hunter, head of UK equities at the stockbrokers Hargreaves Lansdown.

"After a 31% rise over the last month, the shares have succumbed in early trade to some profit taking [but] the general market view remains that the shares are a buy."

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