Barclays yesterday insisted its investment banking business could maintain its growth as the bank wrote down about £1.3bn of assets affected by the credit crunch.
John Varley, its chief executive, said Barclays Capital and Barclays as a group were diversified businesses that could weather storms in parts of their operations.
The bank wrote down £500m of credit, mortgage and leveraged finance assets for the third quarter of the year and an extra £800m for October.
Mr Varley said: "We do feel confident about that [Barclays Capital's growth]. It is not unusual in an investment banking business to have some areas that are hot and some that are cold. The sub-prime area, which has not historically been a big area for us, is cold at the moment. We have other areas that are hot."
"Hot" areas such as currencies, commodities and equity derivatives helped Barclays Capital achieve £1.9bn of pre-tax profit for the first 10 months of the year, ahead of the record figure for the year-earlier period, Mr Varley said.
Barclays Capital has been the main driver of Barclays' profit in recent years as the debt-focused business tapped into the credit boom. Mr Varley defended Barclays Capital against charges that it had expanded into risky areas such as collateralised debt obligations (CDOs) and structured investment vehicles (SIVs).
"Is the business model working well? Is the risk management working well? Is there diversification by geography and asset class? The answer is in the numbers," he said.
Barclays shares rose more than 6 per cent on the news, but closed down 0.5 per cent as banking stocks fell.
The writedown was much less than had been feared by the market, which has hammered Barclays' shares. Last week, false rumours swirled of a $10bn (£4.9bn) writedown and the resignations of Mr Varley and Bob Diamond, the head of investment banking.
An investor said: "The figures are as good as they could be in the circumstances. Even if you allow for the write-offs, they are still making a huge amount of money."
There has been concern about Barclays' liquidity and capital position during the summer because of its exposure to SIVs that it set up for clients. The bank said yesterday it had added deposits and gained increased credit lines from counterparties during the credit crunch.
"Our ratios are comfortable ... we are strong," Mr Varley said.
Barclays brought forward its announcement of Barclays Capital's performance from 27 November, when it will issue its group trading statement. HSBC issued its third-quarter trading statement on Wednesday.
That leaves Royal Bank of Scotland, which is not due to update the market until 6 December. But there is growing pressure on the bank to allay investor concerns before then.
Investors are concerned about RBS's exposure to the credit crunch through its own business and that of ABN Amro, the Dutch bank whose wholesale business it has just bought. RBS's shares fell 4 per cent yesterday. It is said to be aware of the need to get information to investors as soon as possible, but has to get to grips with ABN's books before it can give accurate numbers to the market.Reuse content