Barclays, the UK's third-biggest bank, wrote down about £1.3 billion of credit-related securities tied to the US subprime-mortgage market collapse.
The news came as the US Federal Reserve pumped its biggest temporary daily infusion into the US banking system since just after the September 11th, 2001 attacks as short-term lending rates rose on both sides of the Atlantic.
Barclays rushed out its much-anticipated update two weeks ahead of schedule after spending weeks fending off rumours that it had suffered large losses similar to those at banks such as Citigroup and Merrill Lynch.
The move may put pressure on other banks such as Royal Bank of Scotland to bring forward their trading statements.
RBS declined to comment yesterday, but the bank is thought to be weighing up whether to move up its disclosure or to wait and offer a fuller account of its exposure in early December.
Barclays announced new writedowns and charges for October of £800 million, far less than feared last Friday when speculation swept the stock market and briefly knocked the bank's shares by 10 per cent.
John Varley, chief executive, said the numbers were both "rigorous and reassuring". The group's shares opened sharply higher on relief that the writedown was not larger. But they closed at 530½p, down 2½p, following a renewed sell-off in bank stocks.
Barclays had taken a write-down of £500 million in the third quarter to the end of September.
Barclays' shares have risen 12 per cent this week after Varley told employees that credit-market losses were not as severe as some analysts were estimating.
Barclays followed London-based HSBC in disclosing information that reassured investors about the size of the losses.
"They came in better than the market expected," said Mamoun Tazi, an analyst at MF Global Securities, who has a "buy" rating on the stock. The stock has declined 27 per cent this year, compared with the 16 per cent drop of the Bloomberg Europe Banks and Financial Services Index.
Bob Diamond, president of Barclays, insisted that long-term growth prospects for the Barclays Capital division were largely undimmed, in spite of months of upheaval triggered by the meltdown in the US subprime mortgage market.
Pointing out that, in spite of the write-offs, Barclays Capital had generated record profits of £1.9 billion in the 10 months to the end of October, he said: "We feel pretty good that this is one of those cycles we worry about, and we have continued to grow through the cycle."
The UK banking group's bullish stance is in stark contrast with that of other investment bankers, who have warned that the credit squeeze will lead to an economic slowdown that could cause further problems.
Barclays' losses were partly limited because it acted early to spot the subprime difficulties. - (Financial Times/ Bloomberg)
