Barclays, the UK's third-biggest bank, will write down £1.3 billion on securities linked to the US sub-prime mortgage market collapse after taking a £800 million hit in October alone.The Times reported this morning that the bank would bring forward its trading update by more than ten days to quell speculation that it needed to write off £10 billion.
Shares in Barclays, which were suspended briefly last Friday when the bank was forced to issue a statement denying £10 billion in write downs, rose 5.9 per cent to 564.5p in early trading today after plunging to 474.5p at the end of last week.
The bank detailed this morning that up to the third-quarter ending September 30, its investment banking arm, Barclays Capital, wrote down £500 million on the value of its US mortgage-backed securities.
However, in October, after further deterioration in the US mortgage market, the value of Barclays Capital's assets linked to home loans fell by a further £800 million, bring the total writedown to £1.3 billion.
Pre-tax profit after the write-offs at Barclays Capital reached £1.9 billion for the 10 months to October, which Barclays said was ahead of last year.
John Varley, the Barclays chief executive, said today that the bank has now written down the value of its sub-prime mortgage backed collateralised debt obligations (CDOs) and its second lien loans to zero.
He said: "I am well satisfied with our absolute and our relative performance." Mr Varley also said that the bank would not change its dividend policy.
However, the bank still has £2.6 billion worth of exposure to the US sub-prime market through EquiFirst, the US mortgage business Barclays acquired for $225 million this year, which has been subject to job cuts as the pipeline of new mortgages has dried up.
Barclays Capital also detailed this morning that it was still sitting on £7.3 billion of unsold leveraged debt, down from £9 billion.
But Bob Diamond, the Barclays Capital president, said that sentiment in the market was beginning to change, adding that in the first quarter next year he expected "the new issue pipeline will be operating again".
In contrast, Mr Diamond said that he expected the problems associated with the US sub-prime market to take "up to two years" to work through the system.
Mr Diamond said today: "The diversity of our business, our strong risk management and our focus on execution and clients has allowed Barclays Capital to deliver year-to-date performance in 2007 ahead of last year's record October year-to-date profits.''
Pre-tax profit after the write-offs at Barclays Capital reached £1.9 billion for the 10 months to October, which Barclays said was ahead of last year.
John Varley, the Barclays chief executive, said today that the bank has now written down the value of its sub-prime mortgage backed collateralised debt obligations (CDOs) and its second lien loans to zero.
He said: "I am well satisfied with our absolute and our relative performance." Mr Varley also said that the bank would not change its dividend policy.
However, the bank still has £2.6 billion worth of exposure to the US sub-prime market through EquiFirst, the US mortgage business Barclays acquired for $225 million this year, which has been subject to job cuts as the pipeline of new mortgages has dried up.
Barclays Capital also detailed this morning that it was still sitting on £7.3 billion of unsold leveraged debt, down from £9 billion.
But Bob Diamond, the Barclays Capital president, said that sentiment in the market was beginning to change, adding that in the first quarter next year he expected "the new issue pipeline will be operating again".
In contrast, Mr Diamond said that he expected the problems associated with the US sub-prime market to take "up to two years" to work through the system.
Mr Diamond said today: "The diversity of our business, our strong risk management and our focus on execution and clients has allowed Barclays Capital to deliver year-to-date performance in 2007 ahead of last year's record October year-to-date profits.''
This article is from Times Online
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