Barclays quells rumours with news of £1.3bn writedown

by Gill Montia

Story link: Barclays quells rumours with news of £1.3bn writedown

Barclays, the UK’s third largest bank, has ended rumours of huge losses with the news that it will writedown £1.3 billion on securities linked to the US sub-prime mortgage market.

On Friday of last week, shares in Barclays were suspended following speculation that losses could be as high as £10 billion.

The bank has today reported that it will bring forward its trading update, due at the end of November.

It has at the same time reported that in the nine months to the end of September 2007, Barclays Capital, its investment banking division, wrote down £500 million on the value of its US mortgage-backed securities.

However, the US mortgage market deteriorated further in October and the value of Barclays Capital’s assets linked to sub-prime mortgages fell by a further £800 million during the month.

This brings the total writedown so far to £1.3 billion and it is estimated that the bank still has £2.6 billion worth of exposure to the US sub-prime market.

This exposure is through EquiFirst, a US mortgage business acquired by Barclays for $225 million, earlier this year.

In addition, Barclays Capital also holds £7.3 billion in unsold leveraged debt and according to Bob Diamond, head of Barclays Capital, the problems associated with the US sub-prime market may take “up to two years” to dispel.