BarCap 'is extremely strong' after a lift from Lehman

Barclays Capital chief executive Bob Diamond today said the investment banking unit enjoyed an "extremely strong" start to the year thanks to the purchase of the US operations of collapsed rival Lehman Brothers.

"January was off to a pretty good start, and so we have some optimism for 2009," he said. "We certainly have some concerns about the economy but the strong performance in our investment bank gives us confidence."

However, he also admitted the bank has not performed as well as it should have done, adding: "We've made mistakes. There isn't a banker around the world that wouldn't say they've made mistakes."

Profits for the year fell 44% to £1.3 billion after £8.1 billion of writedowns in "a very challenging market".

The profits were helped by a one-off gain of £2.3 billion from the Lehman acquisition - it would have suffered a heavy loss without the technicality. About a third of BarCap's profits in January were a result of the deal.

"It's quite a good result, especially for 2008 when other banks have had major losses," said Harald Eggerstedt at RIA Capital Markets in London. "It had a bit of luck as well, by acquiring Lehman Brothers at its low."

Barclays bought the investment bank's North American investment operations for just $250 million.