Barclays Confirms Good Guidance

On Friday, Barclays PLC (BCS) confirmed its guidance for the 2008 year, stating that pretax profits after all costs, impairment charges, and market valuation losses, is expected to be well ahead of the £5,300 billion consensus. Our estimate for 2008 full-year pretax earnings is £5,437 billion, which looks as though it will also fall short of official BCS guidance. This announcement by Barclays was an attempt to calm market jitters and followed a sharp drop in its share price on Friday.

In comparison with recent earnings pre-announcements by Deutsche Bank (DB) and The Royal Bank of Scotland Group plc (RBS), both of which are expected to post large losses for 2008, this is a relatively good performance. Despite this, we continue to expect non-US bank shares, including BCS, to perform poorly over the near term, given the poor fundamental outlook for the industry. We also note that depreciation of many foreign currencies relative to the US$ is depressing US$ stock prices.

Barclays also announced that its Equity Tier capital 1 ratio would be 6.5% and its Tier 1 capital ratio would be 9.5%, both pro forma for the conversion of £4.3 billion of Mandatorily Convertible Notes issued late last year. At June 30, 2008, Barclays’ Tier 1 capital ratio was 7.9%.

For the time being, we are maintaining our estimates for 2008 and 2009. Barclays is expected to report 2008 full-year results on February 17, 2009.

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