Barclays has £1.3bn writedown for sub-prime losses

by Richard Kilner

Story link: Barclays has £1.3bn writedown for sub-prime losses

Barclays has announced it is writing down £1.3bn of losses due to securities linked to the American housing crisis. Though substantial, the figure is less than had been feared. Last week it had been rumoured that the losses could total $10bn, but the actual figure is the equivalent of just $2.7bn.

The move has added pressure to the Royal Bank of Scotland to announce its own sub-prime related losses.

RBS shares have fallen sharply of late as investors worry about the indirect impact of the US sub-prime mortgage crisis on the bank. It is due to present an update of its situation on 6 December this year.

Barclays shares fell by 2.5p to end on 530p, whereas RBS’ shares lost 18.5p of value to finish on 448p.

After the writedown Barclay’s before tax profit was £1.9bn for the ten months to the end of October, an improvement on the corresponding period last year by an unspecified margin.

Alex Potter, an analyst at Collins Stewart, described the announcement as both confidence-inspiring and realistic.

Barclays’ chief executive, John Varley, attributed the firm’s resilience in absorbing the writedowns to a strong performance in October.

The bank has expressed confidence that early next year markets such as leveraged finance will recover.