Page last updated at 14:55 GMT, Thursday, 24 April 2008 15:55 UK

'Tough conditions' hit Barclays

Mr Varley
Mr Varley says the bank's capital position must be strong

Profits at Barclays fell in the first quarter of the year because of tough market conditions, chief executive John Varley has said.

Profit in January and February was in line with last year but poor trading in March pulled profits lower, he said.

Mr Varley's comments were released ahead of the bank's annual meeting.

Results at Barclays Capital and Barclays Global Investors were "well below" the strong profits of last year but were still profitable, he added.

"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," Mr Varley noted in his comments.

Varley is not saying 'no, nay, never' to raising cash by selling new shares - but he is saying 'not now'.
Robert Peston, BBC business editor

"Although profits at Barclays Capital and Barclays Global Investors were well below the very strong profits of the equivalent period in 2007, each of the three businesses of investment banking and investment management was profitable in the quarter," Mr Varley said.

Rights speculation

Speculation has mounted that Barclays could be forced to launch a rights issue - a sale of new shares - to raise capital as the credit crunch continues to make it difficult for banks to raise money.

This week, Royal Bank of Scotland announced plans to raise 12bn in what would be the largest rights issue in UK corporate history.

Mr Varley did not comment directly on this or on write-downs linked to the credit crunch.

The second half of 2007 was as hard a six-month period as I can remember
John Varley, chief executive, Barclays

He said that current market turbulence meant that it was a time for strong capital ratios and added that he was targeting a tier 1 equity ratio of 5.25% "in time", against 5.1% at the end of 2007.

Asked by a shareholder at the meeting if there would be a rights issue, chairman Marcus Agius said raising new capital was "an option" but declined to comment further.

BBC's business editor Robert Peston interpreted Mr Varley's remarks to mean a possible rights issue was not off the agenda.

"Varley is not saying 'no, nay, never' to raising cash by selling new shares - but he is saying 'not now'," said Robert Peston.

"It's a brave statement. Barclays, through Barclays' capital, has very substantial exposure to sub-prime, collateralised debt obligations, monolines, loans to private equity, and all the toxic stuff that did for Royal Bank," he said.

'Perspective'

While the second half of 2007 was "as hard a six-month period as I can remember and conditions in some markets in 2008 have remained difficult", Barclays chief executive John Varley said.

He pointed to lower interest rates, high employment and forecast world growth this year of between 3 and 4% as reasons to retain a "sense of perspective about banks".

The bank would aim to generate an annual "economic profit" - above normal investment returns - of between 9.3bn and 10.6bn over the coming four-year period, he said.

Barclays reported profit of 7bn for 2007, down 1% from a year ago.


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