Barclays shares soar after chief's letter

Barclays shares ended a nine-day slump in dramatic fashion today after an open letter from management insisted the bank was well-funded and profitable.

The unusual attempt by chairman Marcus Agius and chief executive John Varley to ease market jitters paid off as Barclays shares jumped more than 60% and its rivals Lloyds Banking Group and Royal Bank of Scotland also rallied.

Investors were relieved that 2008 profits would be “well ahead” of the £5.3bn (€5.6bn) forecast in the City, despite gross write-downs amounting to £8bn (€8.4bn) from the credit market exposures of Barclays Capital.

The bank – which lost almost half of its share value last week amid fears it would need British government help – said it would not need either state or private sector financial assistance.

“Our starting point is that Barclays has £36bn (€38bn) of committed equity capital and reserves; we are well-funded, and we are profitable,” the letter said.

“However, we know that our stakeholders want to see the detailed figures for 2008 as quickly as possible.”

Barclays released the open letter to the stock market in order to “address the principal causes of concern which we are hearing”. In a bid to remove uncertainty surrounding the stock it said it had brought forward its annual results by eight days to February 9.

Mr Agius and Mr Varley said: “These figures demonstrate that although we have been heavily impacted by the credit crunch, our income generation was at a record level in 2008 and has enabled us to withstand this impact and still produce strong profits.”

The letter added the bank planned to provide “extensive details” of the write-downs, “in the interests of clarity and transparency”.

Fears that the upcoming season of banking results will unearth more hefty losses have fuelled investor nervousness.

Ulster Bank and First Active owners Royal Bank of Scotland compounded these worries when it said last week that it expected to reveal the biggest losses ever seen in UK corporate history.

The bank said its bad debts and write-downs on the value of past acquisitions could put it as much as £28bn (€29bn) in the red – higher than the current record of £15bn (€15.8bn) set by mobile phone group Vodafone in 2006.

Following the announcement and the release of details of the second UK government bail out, banks experienced devastating losses.