Britain’s third largest bank, Barclays (BCS), announced this morning that its Q1 earnings declined on $3.3 billion dollars of credit-related writedowns. While BCS didn’t outline any specific plan, Finance Director Chris Lucas refused to rule out additional share sales to shore up capital. Bloomberg:
“Earnings momentum is slowing and there is the prospect of significant further writedowns,” said Sandy Chen, a London-based analyst at Panmure Gordon & Co., who has a “sell” rating on the stock. “As for rights issues, I would rather be at the front of the queue than at the back.”
Royal Bank of Scotland Group Plc and HBOS Plc, two of Britain’s biggest banks, are raising about 16 billion pounds to bolster capital after the collapse of the U.S. subprime mortgage market led to losses. While Barclays’s consumer, commercial and securities units were profitable, first-quarter earnings were less than “the very strong prior-year period,” Chief Executive Officer John Varley said in a statement. The company didn’t disclose how much it earned.
Barclays traded down by as much a 3% in London after the announcement. The news will frustrate investors eager to put the credit crunch in the rear view mirror. Until multi-billion dollar writedowns stop showing up on banks’ balance sheets, it will be difficult to instill confidence in a system in which the next liquidity crisis could be just around the corner.