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Barclays PLC says 1Q profit will be lower than a year earlier
(Associated Press WorldStream Via Acquire Media NewsEdge) LONDON_Barclays PLC will report lower first-quarter earnings compared with the same period a year earlier, after a particularly tough time in March, the bank's chief executive said Thursday.
Profits in global retail and commercial banking were ahead of last year's results in the first quarter, but profits of Barclays Capital and Barclays Global Investors were "well below" the 2007 results, group chief executive John Varley said in a statement prepared for the company's annual general meeting.
"Group profit before tax in January and February was in line with the monthly run rate for 2007," Varley said.
"We were profitable in March as well, but trading conditions were tougher, meaning that group profit for the first quarter was below that of the very strong prior year period. But I believe that the same resilience of financial performance that we saw in 2007 is observable again in our first quarter results of 2008."
Barclays, Britain's No. 3 banking group by market capitalization, reported that full-year profits for 2007 were down 3.4 percent compared with a year earlier.
Barclays has written off 1.6 billion pounds (US$3.18 billion; ?2 billion) in losses because of the subprime lending crisis in the U.S., and has not ruled out further writedowns.
Alex Potter, analyst at Collins Stewart, said Barclays had performed reasonably well compared with other British banks, "but we now feel it is time to cut positions for safety." Potter said there was no reason to believe the market had improved in April after a difficult March.
Nic Clarke at Charles Stanley & Co. was disappointed that Varley gave no information about possible further writedowns, "but the fact that Barclays Capital traded profitably in (the first quarter of) 2008 is somewhat re-assuring."
"We will have to wait until Barclays usual trading update in mid-May to get a more precise view on where the group stands regarding capital and writedowns," Clarke said. "But as we have seen from RBS earlier this week, a month can make a dramatic difference as far as writedowns go and a bank's capital position (and) requirements."
Barclays shares were down 2.1 percent at 446.25 pence (US$8.88; ?5.57) in late morning trading on the London Stock Exchange.
Varley noted that shares were trading close to 800 pence in March 2007, and said the company's performance on the stock market had been poor.
"We can't control the price at which the stock trades, but that doesn't prevent me empathizing with shareholders," he said.
"We must create the conditions in which the stock price can move ahead again, and concentrate on what we can control _ which is the profit performance of the group," Varley added.
Analysts have speculated that Barclays was a likely candidate to follow the lead of Royal Bank of Scotland Group in seeking additional capital through a rights issue. RBS, which outbid Barclays to take over the Dutch bank ABN Amro, said on Tuesday that it hoped to raise 12 billion pounds (US$23.9 billion; ?15.1 billion) from its shareholders.
Varley shed no light on the company's plans.
"To remind you of where we were when we reported in February, our tier 1 ratio was 7.6 percent at the end of 2007, compared with our target of 7.25 percent. And our equity ratio was 5.1 percent compared with our target of 5.25," he said.
He added: "This is a time for strong ratios, and we want to see our equity ratio at least at 5.25 percent in time."
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On the Net:
http://www.investorrelations.barclays.co.uk
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