Barclays results: what the experts say

Politicians stepped up their calls for Barclays to be broken up today as the City congratulated the bank on bolstering its capital and stash of liquid assets it could use in the event it runs into trouble. Barclays' record profits of £11.6bn helped to send its shares rising more than 7% to 294p. But its £2.7bn bonus pot caused alarm - much of the money will go to 23,000 investment bankers in its Barclays Capital investment banking arm. Credit Suisse Analysts at Credit Suisse described the 2010 figures as "one of the strongest set of Barclays numbers we have seen for a while". They particularly highlighted the rise in the liquid assets, which has been demanded by the Financial Services Authority to encourage banks to reduce the risks they run . They were also encouraged that Barclays' core tier one capital ratio - used to measure financial health - rose to 10% from 4.6% in June 2008 before the credit crunch struck. The value of liquid assets - largely government bonds - has soared from £43bn to £127bn. "The liquidity pool has risen almost threefold over the year and most importantly, some £112bn of assets are now cash and deposits at central banks and government bonds. This represents almost 12% of the balance sheet (ex derivatives) and is a notable improvement on the 3% at December 2008. We doubt any other UK domestic bank has seen this much improvement over the last 12 months. Term funding disclosures in the release should also comfort investors," the Credit Suisse analysts said. Ian Gordon, analyst at stockbrokers Exane BNP Paribas Gordon called the results a "full vindication for chief executive John Varley" and "an end to the phoney war on capital". "With a core tier one ratio of 10.0% (vs 4.6% at 30 June 2008) and confirmation of a final dividend of 1.5p the phoney war against Barclays in relation to its capital position should stop". Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers Hunter said the "numbers are further proof that Barclays has skilfully woven its way through the recessionary minefield". "The performance of Barclays Capital was a core contributor to the profit numbers, whilst the impairment levels appear to be under control. Elsewhere, and in anticipation of what remains an uncertain economic outlook, the tier one capital figure has laid a strong foundation to withstand future difficulties. The slow return to a progressive yet prudent dividend policy will also provide some investor comfort," Hunter said, noting the shares are up 174p over the last year. Profits at Barclays Capital almost doubled to £2.5bn and generated much of the underlying profit of £5.3bn. Lord Oakeshott, Liberal Democrat treasury spokesman The Liberal Democrats, who are calling for big banks to be broken up to protect the taxpayer for future bailouts, insist that Barclays illustrates their point. Lord Oakeshott said: "The BarCap tail is wagging the Barclays bank dog. British taxpayers are insuring a boy racer in a Ferrari when it should just be a careful driver in a family saloon. Break up the banks now and limit taxpayers' guarantees to basic retail and business banking." Brendan Barber, general secretary of the TUC Barclays' super-profits show that banks win in both good times and bad. That is why the campaign for the Robin Hood tax - a tiny transactions tax on the billions of pounds that banks whizz round the finance system every day - has gained such strong support. Paying huge bonuses when people are still losing their jobs and business cannot get the loans they need because of a crash made in the finance sector goes against every concept of fairness. It is not good enough for Barclays to say that they did not receive direct aid. All the banks have gained because it's now clear that whatever they do the state will bail them out. Policies designed to help banks rebuild their balance sheets have been used to pay bonuses.