Barclays denies subprime writeoff is coming, then takes it anyway
You’ll forgive me for being a bit confused by this series of media stories emanating out of Barclays Plc:
“Barclays Plc Chief Executive Officer John Varley said his refusal to comment on subprime writedowns indicates there is no truth to speculation about losses that wiped 29 percent off the bank’s market value in the past month.
‘If there were any substance in the rumors that I have been hearing in recent days, we would have been required to have made an announcement to the stock market. But we have not,’ Varley wrote in a staff memo obtained by Bloomberg. ‘That silence says a lot.’
Varley’s statement followed rumors that credit-market losses would force Britain’s third-largest bank to write down the value of assets. Speculation was that subprime writedowns could be as much as 10 billion pounds ($21 billion), according to analysts including MF Global Securities Ltd. That triggered a temporary suspension of Barclays shares today after they fell as much 9.1 percent. They closed the day down 2.4 percent at 474.5 pence.
And the next day:
“Investors sold higher-yielding assets in Australia, South Africa and New Zealand yesterday on speculation Barclays Plc, Britain’s third-biggest bank, may write down as much as 10 billion pounds ($21 billion) on its assets. Barclays Chief Executive Officer John Varley told employees yesterday that the bank’s ‘silence’ is a denial of speculation that it will take large writedowns.”
And then on Sunday:
“Barclays, Britain’s third-largest bank, jumped 9 percent to 517 pence, after declining 12 percent last week. Chief Executive Officer John Varley late last week said his refusal to comment on subprime writedowns indicated there is no truth to speculation about losses that has wiped more than 20 percent off the bank’s market value in the past month.”
And then today:
“Barclays Plc, the U.K.’s third-biggest bank, wrote down about 1.3 billion pounds ($2.7 billion) of credit-related securities tied to the U.S. subprime-mortgage market collapse.
Net charges and writedowns were 500 million pounds in the third quarter and 800 million pounds in October, Barclays said in a statement today.”
Looks like they’ve been taking a page from our friends here is Canada (see post “When US$330 million of subprime becomes US$1.7 billion at CIBC“, November 13-07). It appears that Mr. Varley doesn’t see US$2.7 billion as a “large writedown.”