Barclays shares slide on debt fears

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The Independent Online
A NEW wave of pessimism yesterday hit investors in the clearing banks, as analysts slashed their forecasts for Barclays because of fears of mounting bad debts and possibly a dividend cut as the economy continues to deteriorate.

Barclays shares fell 16p to 301p - bringing the total fall this month to nearly 15 per cent - as the broker James Capel predicted a loss of pounds 155m before tax for 1992.

This came hard on the heels of a forecast last week from Credit Lyonnais Laing that Barclays would slash its dividend and make a pounds 94m loss.

The City fears the crisis in the economy could bring new problems at Barclays' big customers, including the private property group Imry, which owes the bank pounds 440m; Olympia & York; Heron; Ratners; Rosehaugh and the Maxwell companies.

Barclays maintains its bad debt problems are closely linked to the economic cycle and are no different from those of any other bank. But there has been a growing disenchantment with Barclays in the City because it is the most heavily exposed to property lending.

In some cases, notably Imry, Barclays is also the main bank involved. This exposure is such that negotiations over management changes in the property company have been led at the highest level, by Andrew Buxton, the Barclays chairman. Last year Barclays added pounds 200m to its loans to Imry, doubling exposure at a time when the property market was sliding.

Barclays said in the summer that pounds 200m of its bad debt provisions were against problems at five companies. Half of the figure is believed to relate to two customers. Some analysts believe that the provisions against these five companies could easily double again.

The Capel forecast for Barclays compared with a profit of pounds 345m in the firm's previous estimate for the results for the year.

Capel sees a pounds 413m profit for next year, down from the previous forecast of pounds 805m.

Capel is suggesting the dividend will be held but a spokesman said there was 'no small degree of uncertainty' over the payment.

Martin Hughes of Credit Lyonnais Laing said there were tough discussions at Barclays about maintaining the interim dividend in the summer. But he believed that now the question was not whether there would be a cut but by how much.

Other analysts have been downgrading their Barclays forecasts in recent weeks and the shares have been under pressure throughout the month. They started October at 351p.

Earlier this month Yamaichi forecast bad debt provisions of pounds 2bn this year and pounds 1.8bn next.

After the problems of Midland Bank the market is particularly sensitive about the high street clearers. HSBC, which acquired Midland, rose 16p to 475p largely on currency considerations.

The latest wave of selling of Barclays shares began last week after Moody's, the credit rating agency, said that it was examining whether to downgrade Barclays and National Westminster Bank.

Michael Lever of Smith New Court, who cut his Barclays forecast from pounds 300m to pounds 100m profit and said bad debt provisions for 1992 could amount to pounds 2.17bn, also downgraded NatWest from pounds 550m to pounds 410m before tax. But he did not forecast a Barclays dividend cut, saying it was 'not a hugely scientific exercise, especially as the decision is four months away'.

Chris Ellerton of SG Warburg said: 'We have long been cautious about Barclays and its dividend.'

Barclays said: 'Our bad debt experience remains a cause for concern because things are looking gloomy. It is a reflection of the state of business in the UK generally and we can't expect to be immune from that.'

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