Middle East a boost for Barclays
An increase in earnings from the Middle East and Africa helped blunt the impact of a decline in profit worldwide for Barclays, but the British lending giant was still left to grapple with mounting costs and thousands of job cuts as growth cools in Europe.
The bank, which is the third-biggest international lender in the UAE revealed net profits for the second quarter of £486 million (Dh2.9 billion), a 64.3 per cent decrease on the same period last year and far below analysts' estimates of £915bn.
Barclays' total net income from insurance claims from the Middle East and Africa region amounted to £1.26bn in the second quarter, a 4.4 per cent increase on the same period last year. The bank's lending in the region has been flat since the start of the year, with increased government lending offsetting a decline in home loans in many markets in the region.
"I am pleased with the progress made across Barclays in the first half," said Bob Diamond, the bank's chief executive, stressing the bank's drive to provide credit to small businesses had helped boost economic growth, especially in its native Britain.
Barclays employed 146,100 staff worldwide at the end of June, but plans to cut up to 3,000 staff this year. Barclays has reduced staff numbers by 1,400 worldwide so far this year, including a reduction of 123 in the UAE.
In a "challenging environment" Barclays had made efforts "to support job creation and business growth in all the markets we operate", he said.
On Tuesday, HSBC, the international lending giant, reported sharply higher earnings for the quarter, with profits from the Middle East and North Africa also surging. Many other Middle East banks have reported sharply higher profits for the second quarter. In May, Barclays said it would reduce staff numbers in the UAE by 123 after it relocated the headquarters of Barclays Africa from Dubai to Johannesburg.
Barclays was unexceptional among European banks in having reported lower earnings amid difficult market conditions, said a financial analyst at Collins Stewart Hawkpoint, , who did not wish to be named.
Europe has lurched from one sovereign debt crisis to the next during much of the past quarter, with many banks having taken writedowns as successive ratings cuts take hold of debt issued by countries such as Greece, Portugal and Ireland.
"Against that backdrop, Barclays' corporate and investment banking performed well, but it was going to be dull inevitably," the analyst said, adding that the bank's progress in many emerging markets, such as the Middle East, had been much stronger. "It has been growing at a better pace and that reflects a better economic backdrop in the markets they're active in. Business there hasn't been marred by large asset writedowns or sovereign problems."
The job cuts, although lower in absolute numbers than some peers, were likely to be about equal over time because of ongoing reviews of the bank's business, the analyst said.
Published: August 3, 2011 04:00 AM