Profits lift but job cuts may go on at Barclays

The job cuts were 500 more than the predicted 3,000 redundancies and Barclays’ chief executive Bob Diamond said the trend could continue as the bank fights to revive profitability and slash costs.

The bank’s underlying quarterly profits rose five per cent thanks to gains in retail banking and credit cards, which offset the third sharp fall at the investment arm.

Barclays said capital markets were difficult in October as the eurozone’s financial problems deepened.

It warned that capital markets are likely to remain tough despite the improvement seen following last week’s announcement of plans to solve the European crisis.

“There is no question market conditions this year have been challenging and we’d expect that to continue in some way into next year, given the weaker economic growth we’re seeing,” said Mr Diamond.

Barclays said its sovereign exposure to Spain, Italy, Portugal, Ireland and Greece reduced in the third quarter by 31 per cent to £8bn. Half of that is Italian government bonds, and £2.7bn is Spanish sovereign debt.

Mr Diamond said the eurozone rescue deal struck last week was “calming and substantive” but there was more work to be done.

Pre-tax profits in the third quarter to the end of September rose to £2.4bn.

Stripping out a £2.9bn gain on the value of its own debt and other one-off items, profits were £1.34bn, up five per cent on the 2010 period.

Barclays said it increased new lending to businesses to £33bn, including £11bn to small and medium-sized enterprises, putting them on track to meet Government-agreed Project Merlin targets.

Mr Diamond said Barclays is on course to meet targets set over the summer, including £1bn in cost savings.

The weaker performance at Barclays Capital (BarCap) was offset by a strong show at its UK retail banking division, which saw revenues increase 21 per cent to £1.2bn and pre-tax profits more than double to £494m.

Top-line income at BarCap, which is expected to provide more than half of this year’s group profit, fell to £2.25bn, down 22 per cent from the second quarter to be in line with the consensus forecast as capital markets activity was hit hard across the industry.

Analysts said that was a more resilient performance than US and European peers, which have shown an average fall of about a third. BarCap typically outperforms during difficult markets and can lag growth when markets boom.

Cavendish Asset Management fund manager Paul Mumford, whose firm owns around one million Barclays shares, said: “It does look as if all their businesses are making a contribution, which is always a decent sign.”

Bad debt charges were down 34 per cent to £2.8bn.

Barclays and its domestic rivals face having to separate their UK retail banking operations under planned reforms to safeguard taxpayers, but the bank declined to say how much extra this could cost.

MF Global files for bankruptcy

MF Global Holdings, the futures broker, has filed for Chapter 11 bankruptcy after a deal with a buyer fell apart. The bankruptcy filing follows the collapse of talks to sell assets to Interactive Brokers Group.

The bankruptcy makes MF Global the most prominent US casualty from the euro-zone debt crisis and harkens back to 2008 when Lehman Brothers collapsed. Analysts said the impact of MF Global should be contained.