Barclay’s Earnings: Banks Still Bleeding

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Barclays (BCS) said it would take a write-down of about $2 billion in impaired assets, some of them related to mortgages. The big Brit bank may have to raise $1 billion to keep its balance sheet looking good.

According to Reuters "Finance Director Chris Lucas said Barclays was keeping its options open in regard to boosting capital."

It does not matter so much the size of the writedown. What is important is that money center banks continue to write-off billion of dollars of assets as the year 2008 gets longer in the tooth. No really large bank in the US or Europe has given any indication that it is positive that the revaluing of assets is over.

Rumors and opinions that the credit crunch is over abound. Some of the bank stocks have recovered a bit of their huge losses. But, the mortgage fiasco cannot really end while default rates continue to move up, and other consumer credits held by banks, either directly or in derivative form, have not really hit the fan yet. Based on the economy, they surely will.

The temptation to think that the world of banking is getting better is wishful thinking. Barclays has just made that very clear.

Douglas A. McIntyre