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Barclays write-down proves a relief to investors
By Julia Werdigier

Thursday, November 15, 2007
LONDON: Barclays on Thursday announced lower-than-expected write-downs on securities related to the U.S. subprime mortgage market, calming investors who had recently sold off shares in the British bank amid fears that it would post losses.

Barclays, based in London, said it would write down the value of the risky securities by about £1.3 billion, or $2.7 billion. It is the latest bank to announce such a measure since the U.S. mortgage crisis began to rock the financial world this year.

Until now, Barclays had remained silent about rumors of large write-downs that started circulating in the market after the summer, which had unnerved investors.

After the unscheduled statement, the bank's shares rose gingerly, gaining 1 pence in midday trading Thursday to 534 pence. The stock has declined 27 percent this year.

"The numbers are rigorous and reassuring," John Varley, chief executive, told analysts on a conference call. He added that income from commodities, equities and emerging markets had helped absorb the write-downs. For October, Barclays Capital, the securities unit where most exposure to the market turmoil lies, reported the best income levels ever of any fourth-quarter month, he said.

Barclays will write down £500 million for the third quarter and £800 million for October, it said. October was an especially difficult month in the markets, as credit rating agencies downgraded collateral debt obligations, or CDOs, which are products that repackage debt and sell it off in tranches. That was followed by giant write-downs on similar products by Citigroup, Merrill Lynch and other securities companies, increasing the severity of the market turmoil.

Robert Diamond, president of Barclays, said he expected the subprime problem to be resolved in one or two years, with the leveraged loan markets recovering sooner. "There has been a correction in leveraged finance, and we already see an improvement in tone," he said during the conference call, adding that he expected the business to recover in the first quarter of 2008.

The bank also assured that there was no risk of further write-downs in residential mortgage-backed CDOs. "October brought a second leg down in the market, and we said let's take account now of what could come down this year," Diamond said. "We feel this is clinical and conservative."

Barclays also said that income from commodities, foreign exchange and operations in Asia had been strong.

The French bank Credit Agricole on Thursday announced a charge of €546 million, on top of previously announced write-downs.

HSBC Holdings said Wednesday that losses in the U.S. housing market were spreading to credit card and other consumer loans, forcing the bank to set aside $3.4 billion to cover bad loans, more than it had forecast about four months ago.

The same day, the brokerage company Bear Stearns said it would take a $1.2 billion write-down on its exposure to securities tied to subprime mortgages.

Fonte: Herald tribune