Profits at Barclays Plc, Britain's third-biggest bank, fell in the first quarter from a year earlier after its investment bank and fund management arms were hit by tough financial market conditions. But the bank, facing growing speculation it will follow rival Royal Bank of Scotland in launching a rights issue, said it had options to rebuild its capital and tapping shareholders was not inevitable.
Barclays Chairman Marcus Agius refused to directly answer shareholders at its annual meeting when asked if the bank planned a rights issue, and said it could build capital by retaining earnings, managing its balance sheet or raising new equity.
After the meeting, Barclays President Bob Diamond told reporters: "Because of our performance and because of how we've managed, we have options and that's a good place to be. "There's a lot of people trying to project someone else's position and performance on us ... we're not going to speculate, but you have to look at our performance."
Barclays, ahead of a full Q1 trading statement on May 15, told investors profits at Barclays Capital and Barclays Global Investors were "well below" the strong levels of a year ago, but both businesses were profitable.
The bank said this included any writedowns it needed to make, but did not comment on whether it will take any more hits amid concern it faces billions more in losses after rivals have written down the value of their risky assets. Credit Suisse announced a $5 billion writedown for the first quarter on Thursday and RBS said this week it could take a hit of nearly $12 billion.
By 1500 GMT, Barclays shares were down 1.6 percent at 448 pence in a weak UK bank sector, extending their fall this week to 10 percent. Analysts said the fact the bank had remained profitable indicated its writedown would be modest compared with those of many rivals. But a lack of detail undermined confidence and added to concern that slowing earnings at BarCap and BGI has left earnings running below forecasts.
"If credit market conditions persist, the (earnings) miss is already double-digit and likely growing fast," said Alex Potter, analyst at Collins Stewart, cutting his rating to "sell".
Barclays wrote down the value of its risky assets by 1.6 billion pounds last year, but capital markets deteriorated sharply again in March, stoking talk that more writedowns will force rights issues for it and rivals such as HBOS. "We're not immune from the markets but we do expect to outperform," said Diamond, who also runs BarCap and BGI. "We did in 2007 and as we see other results come in it will be clear that we outperformed (in Q1)."
RBS slashed the value of its investments in below-prime Alt-A mortgages and collateralised debt obligations as part of its writedown, which analysts said could see other cut values for those assets further. Collins Stewart's Potter said RBS's mark-down could translate to a 6.2 billion-pound writedown at Barclays, but Deutsche Bank estimated it would be nearer 3.7 billion. Barclays said in February its assets were of better quality than rivals.
Barclays said market turbulence meant banks needed strong capital ratios, and it was targeting a Tier 1 equity ratio of 5.25 percent "in time", from 5.1 percent at the end of 2007.Profits in its global retail and commercial banking unit in Q1 were ahead of 2007, it said.