In a speech at Barclays AGM, Varley said group profit before tax in January and February was in line with the monthly run rate for 2007.
He said: “We were profitable in March as well, but trading conditions were tougher, meaning that group profit for the first quarter was below that of the very strong prior year period.”
Varley admitted that second half of 2007 was “as hard a six month period as I can remember” with conditions in some markets in 2008 having remained difficult.
He added: “But we must maintain a sense of perspective. Interest rates are moving lower. Employment is high. World economic growth this year will be between 3% and 4% again. Governments and central banks around the world are showing their determination to help the financial system recover.
Varley said that the industry needs to retain a sense of perspective about banks too.
“I recognise that when some banks miscalculate risk, then the reputation of the whole industry is tarnished. It’s important not to lose sight of the fact that a good banking system is an indispensable part of a healthy modern economy. Innovation and risk taking by the financial services industry has helped to create unprecedented economic growth in the world over the last twenty years. It would be bad for the world if we were to conclude that banks should stop taking risk. Managing financial risk is what banks do.”
“The example of the Japanese economy between 1990 and 2000 illustrates what I’m talking about. The Japanese banks’ sense of risk aversion overtook the financial system, and that led to a decade of economic stagnation, as the banks stopped lending.”
Varley warned that it is very important that risk management does not become risk aversion.
Varley said Barclays current equity ratio was 5.1 per cent compared with its target of 5.25 per cent. He said it still wants to see its equity ratio at least 5.25 per cent in time.