Barclays’ (NYSE:BCS) first-half earnings provide some vindication of the strength of the “universal bank” model, in which investment and commercial banking are housed under one roof (think Citigroup (NYSE:C) and JPMorgan Chase (NYSE:JPM)), over the pure-play investment bank (Goldman Sachs (NYSE:GS), Lehman Brothers (NYSE:LEH)).

In U.K. retail banking, for example, Barclays actually expanded its mortgage lending business during the first half. That spells increased market share (more than one-fourth of all net new mortgage lending in the first half!), with many lenders pulling back in this area. Apparently, Barclays isn’t capital-constrained and can act opportunistically in this market -- job well done!

There is the small matter of a £2.4 billion charge
Under normal circumstances, £2.4 billion ($4.7 billion) in impairments and provisions -- almost half of which was due to collateralized debt obligations (CDOs) and other credit exposures -- would be considered disastrous, but these are anything but normal circumstances. In fact, Barclays is more on top of its problems than some of its competitors.

Indeed, Barclays sold £6.3 billion ($12.1 billion) in distressed loans/securities at prices consistent with their carrying value on the bank’s balance sheet and without providing any financing. That suggests the bank has a pretty good handle on the value of its assets.

Compare that to Merrill Lynch (NYSE:MER), for example, which is taking a $4.4 billion writedown in the third quarter, linked to the sale of $30.6 billion in CDOs. (Worse, Merrill provided 75% of the financing for the sale – it still has a degree of exposure to further losses.)

Barclays: what you need to know
If you want to own one of the universal banks, there are certainly worse options than Barclays. It has a number of attractive franchises (U.K. banking, exchange-traded funds) and appears relatively well-managed. In addition, the universal banks look well-positioned to compete with securities firms in the post-credit-crisis environment (commercial banking provides a cheap and stable source of funding).

All the same, I think any firm that is involved in investment banking is subject to regulatory risk right now. As such, there are more attractive opportunities for risk-averse investors (like me!) in other segments of the financial services industry -- U.S. regional banks, for example.

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