Barclays Capital stability calms investors

Barclays led big bank shares up yesterday as it issued a reassuring trading statement with no more bad news from its investment bank.

The bank's shares rose 5.4 per cent after it updated the market on its retail and commercial banking operations. Barclays rushed out details of credit crunch writedowns at its investment bank nearly two weeks ago to ease market jitters. The lack of more bad news in yesterday's statement calmed investors.

The news lifted shares of Royal Bank of Scotland 2.2 per cent. Investors have been concerned about RBS's exposure to US mortgages and leveraged loans. HBOS shares also rose, climbing 2.9 per cent.

Barclays is acting as a bellwether for UK lenders exposed to the capital markets because its Barclays Capital investment bank was involved in the booming credit markets and has given the most information about its exposure. BarCap wrote down £1.3bn in the four months to the end of October. A fund manager said Barclays' statement "gives a degree of comfort" but said the UK's banks needed debt markets to reopen to avert a big hit to earnings and the economies that feed their growth.

Chris Lucas, the bank's finance director, told analysts 2008 would bring "a greater range of uncertainty". Barclays reported little impact from the credit crunch on its retail banking operations in the first nine months of the year. Bad-debt performance in unsecured lending and at Barclaycard improved and charges "remained negligible" in mortgages, it said.

Despite the credit crunch, the bank said its liquidity remained strong and it gained from inflows of deposits. Earnings per share for 2007 will be "broadly in line with the current market consensus" of 68.8p, giving the bank some leeway in current unpredictable market conditions.

The UK retail bank had good profit growth, excluding settling of reclaimed overdraft fees from previous years, the bank said. Underlying profit growth at Barclaycard was strong. International retail and commercial banking had strong growth, though profit in sterling at ABSA, the South African bank owned by Barclays, fell because of the weak rand.

Alliance & Leicester was the worst performer of the UK banks after the ratings agency Standard & Poor's changed its outlook on the company to negative from stable. S&P said tight inter-bank lending conditions were putting pressure on its funding and earnings. S&P predicted tighter margins, reduced business growth and write-downs on structured finance assets. It kept its ratings on A&L's debt because the bank is "fundamentally sound" in terms of asset quality, profitability and capital.