Barclays' £1.3bn hit is lower than feared

Banking giant Barclays today revealed a lower-than-feared £1.3bn (€1.8bn) write-down on investments linked to the crisis-hit US mortgage market.

The group said it had taken an £800m (€1.12bn) hit in October alone amid a particularly “turbulent month” as the credit squeeze tightened.

Today’s update was brought forward by nearly two weeks to help allay fears over a rumoured £10bn (€14bn) black hole in Barclays’ investment banking division.

There had also been speculation that chief executive John Varley and Bob Diamond, head of the Barclays Capital investment bank arm, were poised to quit.

Both Merrill Lynch and Citigroup have lost their top bosses in recent weeks after revealing heavy losses due to the credit squeeze and sub-prime fall out and concerns suggested Mr Varley and Mr Diamond would follow suit.

However, in an attempt to quash the rumours – which had seen Barclays shares plunge by more than 12% in value last week – the group stressed its Barclays Capital investment banking division was trading ahead of last year.

It said the business delivered £1.9bn (€2.7bn) in profits before tax in the first 10 months of the year, – taking into account the £1.3bn (€1.8bn) in write-downs.

Barclays Capital had the best fourth quarter monthly income level last month in its history, according to the group. It benefited from strong business in interest rate swaps, government bonds and foreign exchange trades.

However, Barclays said it still had £2.6bn (3.64bn) worth of exposure to US sub-prime mortgages through its recently acquired American home loan business EquiFirst.