Page last updated at 16:53 GMT, Monday, 26 January 2009

Barclays letter causes share jump

Barclays logo
Like most banks, Barclays has seen its share price fall sharply in recent weeks

Shares in Barclays have jumped by more than 70% after the bank wrote an open letter to reassure investors of its continuing good health.

In the joint letter, chairman Marcus Agius and chief executive John Varley said the bank would report a 2008 profit "well ahead" of market targets.

They said annual profit would be higher than 5.3bn, despite 8bn of gross write-downs at its investment bank.

Like most banks, Barclays has seen its shares fall heavily recently.

We are well funded and we are profitable
Barclays chairman Marcus Aguis and chief executive John Varley

"In view of the events in the banking sector last week, we have decided to communicate now with employees, customers, clients and shareholders," said Mr Aguis and Mr Varley.

"These figures demonstrate that, although we have been heavily impacted by the credit crunch, our income generation was at a record level in 2008 and has enabled us to withstand this impact and still produce strong profits."

In the past two weeks, Barclays's shares fell by more than two-thirds on worries that the bank would have to raise more capital to cope with write-downs triggered by the global economic slowdown.

However, the letter triggered a dramatic rebound in Barclays shares, which closed up 37.5 pence, or 73.2%, at 88.7p.

Other bank shares also rose, with Lloyds Banking Group up 32% at 65.2p and Royal Bank of Scotland 20% higher at 14.5p.

'Well funded'

In November last year, Barclays secured 7bn of private funds, mainly from Middle Eastern investors.

The letter from Mr Agius and Mr Varley said that the bank's capital resources were "well in excess of regulatory requirements".

"We are well funded and we are profitable," it said.

The bank chiefs reiterated that Barclays would not be seeking any financial support from the government.

Barclays will now be publishing its full-year results on 9 February.

It said its profits had been lifted by its 1bn purchase of core assets of US investment bank Lehman Brothers, which was announced in September.

Barclays bought Lehman's North American investment banking and trading unit, in addition to the firm's New York headquarters and two data centres.

Barclays added it had already made a "good start" to 2009.

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