Barclays Rejects Talk of Big Writedown as Fears Mount
British bank Barclays categorically denied rumors it was about to announce a $10 billion writedown and see its top management quit, after such market talk sent its shares tumbling over 9 percent.
"There is absolutely no substance to those rumors," a spokesman for Britain's third biggest bank said when asked about a possible $10 billion writedown.
The denial failed to fully dispel fears that Barclays has a sizeable exposure to deepening credit market turmoil, which was sparked by a U.S. subprime housing crisis and has seen many of Wall Street's biggest banks write down billions of dollars.
The Barclays spokesman also said there was "absolutely no substance" to talk the bank planned an emergency rights issue or that John Varley, its chief executive, or Bob Diamond, head of its Barclays Capital investment bank unit, planned to resign.
He declined to comment on talk that the bank may issue an emergency statement, but reiterated it planned to issue a trading update on Nov 27.
Barclays shares had pared losses but were still down 2.9 percent at 472 pence.
The shares had earlier crashed to 442p, their lowest level since July 2004, as talk swirled that it faces big credit market related losses.
The London Stock Exchange temporarily suspended trade in Barclays shares, which is automatic after a big move in a stock.
Losses accelerated after Wachovia, the fourth-largest U.S. bank, said it had incurred about $1.1 billion of further losses in October from credit market turmoil. It followed warnings of even bigger writedowns at U.S. banks Citigroup, Merrill Lynch and Morgan Stanley.
Separately, BarCap has shifted responsibility for credit trading between its two co-presidents, from Grant Kvalheim to Jerry del Missier, a source familiar with the matter said. He said the shift occurred in September to simplify the investment bank's structure. BarCap declined to comment.
Royal Bank of Scotland shares also remained under pressure on fears it may make a big writedown. They were down 3.2 percent at 401.75p, after touching 387.5p, their lowest for five years.
Shares in RBS have fallen for seven straight days, during which time they have fallen 22 percent, the same as the drop by Barclays. Some 20 billion pounds has been wiped off the combined value of the banks so far this month.
"The more uncertainty there is around their positions the more the shares are being pushed down," said Mamoun Tazi, analyst at MF Global.
RBS and Barclays were the two most heavily traded UK stocks.
A sharp rise in the cost of credit default swaps (CDS), which are used as insurance on credit quality, also showed the worry about write-offs, analysts said.
Barclays and RBS CDSs moved 10 basis points wider on Friday.
Barclays CDSs have widened 31 bps just this month to 68 bps; RBS is 20 bps wider at 61 bps and HSBC is 18 bps wider at 44 bps -- all considered major moves for financial credits.
It addition to worries of big writedowns, Barclays and RBS are likely to see a sharp slowdown in growth at their investment bank arms next year due to the market turmoil, analysts said.
Other UK bank shares also fell, with HBOS, HSBC, Alliance & Leicester all down over 2 percent. Mid-cap lenders Bradford & Bingley and Paragon fell 4 percent and 6 percent, respectively.