Barclays reveals sub-prime losses - not as bad as some people feared!
Barclays has confirmed that it did not escape the woes from investments in risky US home loans, taking a hit of £800m ($1.64bn) in October.
Sub-prime write-downs at its Barclays Capital investment bank arm now total £1.3bn, taking into account a £500m write-down in the third quarter.
The write-down was less than feared, and the bank said Barclays Capital profits were higher than last year.
Rumours had circulated that the bank was hiding big mortgage-backed losses.
“Today’s extensive disclosure demonstrates the strength and resilience of our performance during the year and in particular during the turbulent month of October,” said Barclays chief executive John Varley.
The bank also said Barclays Capital still had more than £5bn worth of exposure to investments in packages of debt, which includes exposure to US sub-prime mortgages.
However, despite the problems the bank said it still managed to make a pre-tax profit of £1.9bn in the first 10 months of 2007 even after it wrote down the losses.
BBC NEWS | Business | Barclays reveals sub-prime losses.
Well, I find this interesting. I was at a dinner party on Friday, and one of the things that we talked about was how badly the American sub-prime lending fiasco was going to be felt here.
It was my belief that we will feel it, but it won’t have the same impact as in the States and I don’t see any UK CEOs losing their jobs (I mean, if the CEO of Northern Rock is still there….)
These results from Barclays support my view. Obviously, they are lucky that the low value of the Dollar makes any losses over there easier to swallow, but the fact that Barclays is one of the most international of our high-street mortgage lenders, but has only experienced modest losses is very reassuring!
At worst, I think that it will curtail their ambitions for big acquisitions.
Some will say that the British banks are only drip-feeding their losses out, and that their exposure remains high, but how much of an exposure is $1bn going to be in a couple of years – that could be £400m if the dollar continues to slide!