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IPE special report May 2018

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BGI performance adds to Barclays profit

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  • BGI performance adds to Barclays profit

UK - A "resilient performance" by Barclays Global Investors in the first half of 2009 deliverd a 4% increase to its gross profit to £276m (€324.8m) and helped Barclays to report a profit before tax of around £3bn.

While BGI has added value directly during this period, the $13bn (€9.08bn) sale of BGI to Blackrock, expected to be approved at a general meeting of shareholders on 6 August, is expected to complete by the end of the year, giving Barclays a 19.9% stake in the "enlarged Blackrock Global Investors business".

By the end of the first half, BGI's profit before tax had increased 4% to £276m, net of costs of £106m resulting from the termination of CVC Capital Partners' proposed purchase of the iShares business.

Figures showed income for the business fell 2% to £963m because of lower management and incentive fees, as overall net fee and commission income declined 6% to £923m, although this was partially offset by increased net interest revenue.

Group assets under management also fell by 2% to £1.02trn in the first six months, as £127bn in negative exchange rate movements were offset by £72bn of new assets and £34bn of favourable market movements. Had figures been calculated in dollar terms, assets under management would have increased 12% to $1.68trn following beneficial exchange rates, said the group in its report.

Despite the overall positive performance of BGI in the first half, Barclays noted the sale of the asset business would help strengthen its core capital requirements, as at the beginning of 2009 it had a core tier 1 ratio of 5.6% but "on a pro forma basis taking into account the BGI sale, this ratio was 8.8% at the end of June".

Elsewhere, the half-yearly results showed the IAS19 pension deficit across all Barclays pension schemes at 30 June 2009 increased from a shortfall of £1.29bn at the end of December 2008 to £3.9bn six months later, against a surplus of £141m in June 2008.

Barclays blamed the increase "primarily" on a lower expected return on assets, while the figures revealed the majority of the deficit is attributable to the main UK pension scheme which recorded a deficit of £3.5bn, up from a shortfall of £858m in December and against a surplus of £439m in June 2008.

It noted the "most significant reason for this change was the decrease in AA long-term corporate bond yields which resulted in a lower discount rate of 6.42% and an increase in the inflation assumption to 3.75%, both of which increased the liabilities".

Following the significant increase in the pension deficits, Barclays announced earlier this year it would be closing its DB schemes. However, ahead of the result of a ballot into potential industrial action the trade union Unite is planning a demonstration against the planned closure at the general meeting later this week.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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