Barclays' 2007 Pre-Tax Profit Slips

Barclays reported a pre-tax profit of 7.08 billion pounds sterling ($13.8 billion) in 2007, down from 7.14 billion pounds sterling a year ago, and the firm increased its dividend for the year to 34 pence from 31 pence in 2006.

Profits before tax within Barclays Capital, the investment banking business, were 2.34 billion sterling in 2007, up 5% from 2.22 billion sterling in 2006. The banking giant’s asset management business, Barclays Wealth, saw a 25% jump in profit last year to 307 million pounds sterling from 245 million in 2006. Income growth within the unit was 11%, driven by increased client funds and greater transaction volumes.

The British banking giant said credit market exposures resulted in net losses of 1.64 billion pounds sterling. “The net losses primarily related to ABS CDO super senior exposures, with additional losses from other credit market exposures partially offset by gains from the general widening of credit spreads on issued notes held at fair value,” the bank said.

Barclays said collateral for ABS CDO super senior exposures primarily comprised residential mortgage backed securities. Seventy-nine percent of the RMBS subprime collateral was 2005 or earlier vintages.

Within Barclays Capital, net income was driven by strong performance in interest rates, currency and equity products and commodity businesses.

Robert Diamond, head of Barclays Capital, told IDD Tuesday that “the interest rate businesses, notwithstanding the difficult market conditions, were up 76%, which is a stunning number. The currency businesses were up 60%. Our businesses in Asia doubled. Our business in Africa doubled. So we had a really strong underlying performance of the business.”

Diamond added that the banking firm’s interest rate and currency businesses were active in the wake of the credit market turmoil last summer.

“The volumes of business we were doing in July and August, September and October, during the worst of the crisis, were at record levels. A lot of those flows were coming from Asia,” said Diamond. “So much of the wealth created in the Asian central banks and the sovereign funds was moving aggressively into interest rates and against the dollar.”