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Barclays Says on Track for Profit Rise for 2007

Reuters
Tuesday, 27 Nov 2007 | 4:15 AM ET

British bank Barclays is on track to meet analysts' expectations for earnings growth of 4 percent this year and said diversification had provided some shield from recent turbulence in capital markets.

Britain's third-biggest bank said on Tuesday it should deliver a 2007 pretax profit of 7.1 billion pounds ($14.7 billion), up from underlying profit of 6.8 billion in 2006.

By 0846 GMT Barclays shares were up 2.8 percent at 511 pence, the top performing FTSE 100 stock.

"The market should be relieved that there were no further BarCap risks announced and trading elsewhere is in line with expectations," said James Hutson, analyst at Keefe, Bruyette & Woods, referring to Barclays' investment banking arm.

Barclays is striving to reassure investors it can grow its domestic and international retail arm and has a clear strategy after losing a bid battle to buy Dutch rival ABN AMRO earlier this year, which would have made it a top 10 global bank.

Fears of a Slowdown

More worrying for investors -- and a reason for a 22 percent tumble by its shares in the last seven weeks -- are fears of a sharp slowdown in growth at its investment bank arm and speculation of funding problems due to a global credit crunch.

Barclays said its liquidity remained strong and it continued to see good inflows of deposits.

Its performance in the first nine months of this year was underpinned by "good" profit growth in UK retail after the impact of refunds on bank charges and at asset manager Barclays Global Investors.

It reported "strong" profit growth at its Barclaycard credit card unit excluding one-off items, "very strong" income growth in its international businesses outside South Africa, and "excellent" profit growth at Barclays Wealth.

Bad debts at Barclaycard and for UK unsecured lending continued to improve, it said.

Writedown

The bank had already said its Barclays Capital investment bank unit would take a 1.3 billion pound writedown for losses on securities linked to the U.S. subprime housing crisis, but the unit's profits for the 10 months to the end of October were still up on the year before at 1.9 billion pounds.

Barclays said its UK Banking business should cut the ratio of costs to income to 50 percent this year, excluding the impact of refunds on charges, from 52 percent in 2006.

UK business banking profits had also shown good growth in income and profits, it said.

Depreciation in the South African rand would leave Absa's profit contribution down on the year in sterling terms, despite strong growth in local currency terms. BGI's profit growth in sterling would also be dampened by the weak U.S. dollar.

Earnings should come in near the 68.8 pence per share currently forecast by analysts, up from underlying EPS of 66.8p a year ago, it said.

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