Barclay's Second Verse Same as it's First

Barclays second half and full year 2008 earnings report was a rerun of it's first, not so much the results, but the reporting itself, including beating low ball analyst estimates. In the second half just as the first the bank and it's cheer leaders are trying to con investors into complacency about it's financial health.

Barclays Plc reported second-half profit that exceeded analysts’ estimates, and President Robert Diamond said the investment bank had an “extremely strong” start to 2009 after buying Lehman Brothers Holdings Inc. assets.

Barclays, the third-biggest U.K. bank by assets, rose 11 percent in London trading after saying credit writedowns this year will be less than last year’s 8.1 billion pounds. Net income jumped to 2.66 billion pounds ($3.9 billion), or 31.3 pence a share, in the six months ended Dec. 31, up 49 percent from a year earlier, according to Bloomberg calculations based on full-year results posted today.

“There’s a bank that’s alive and well underneath all this concern about structured credit,” said Michael Trippitt, a London-based analyst at Oriel Securities Ltd., who has an “add” rating on Barclays.

Makes you wonder how many shares Michael Trippitt is carrying, the shares took about a 25% hair cut since the begging of the year alone.

That Barclay's continues to post profits in the credit crunch is impressive, but that it keeps their writedowns un-written down is not, and it will not be able to keep them down forever,

...,Britain's third largest bank by assets warned that further asset writedowns -- on top of the massive 8.1 billion pounds ($11.9 billion) booked for 2008 -- were likely and said executive directors would not be getting any bonuses.

Oh no! No bonus in a year where profits declined by a percent, someone do something! Yes someone shut them up please, but there's nothing you can do. the bankers created the credit crisis in ruthless pursuit of their bonus, but now as a crisis sets in the banks start singing and dancing to the no bonus song, at Barclays it's standard operating procedure, but rolling up the earnings date to promo gate to the market; Barclay's is running scared.

While the bank blusters about not taking aid from the British government it took $5.8 billion from governments in the middle east, and not that the British taxpayer is off the hook. Barclays has received credit guarantees and seems to be gearing up to take more.

British Treasury chief Alistair Darling on Sunday launched a review of the banking industry which will also look at payment practices. Critics accused the government of failing to crack down on the controversial payouts amid mounting public anger over rewards for staff at institutions bailed out by the taxpayer.

For the future, Barclays said it was reviewing its compensation arrangements to ensure they "evolve appropriately."

And you know that appropriately means taxpayer prepare to bend over!

Now while were at it lets not forget the stealthy phrase the bank used in it's first half report.

The writedown, partly offset by an £852m gain from revaluing the bank’s own debt, was largely responsible for the fall in first-half pre-tax profits, down 33 per cent to £2.75bn.

Well actually the bank did get creative in the second half report, it changed the numbers.

Barclays took gains of 1.7 billion pounds on the falling market value of its own bonds, meaning it could buy back its debt for less than before.

But that phraseology is misleading. It should say it could if it would, but it wont, so it can't be realized, to pay expenses. It's all an accounting fiction.

Many European banks have booked gains in this way, because the fall in value means they could buy back their debt for less than before. But other banks, including Deutsche Bank, have refused to do so because the gains eventually reverse out as the debt recovers in value.

In others words the Barclays dug a 1.7 billion pounds ($2.45B) and still has to fill it up again, but for now, and everything is for now for the bank on the edge, it looks good.

So just like the first half the bank refuses to take the writedowns that it will have to take, while it talks up the improving condition of the bank.

The level of write-downs Barclays has taken compared to its rivals has been a contentious issue and expectations of more losses have seen its credit rating downgraded in recent weeks. See archived story.

Robert Sage, an analyst at Macquarie Research, said Monday that net write-downs may remain "at a material level" in 2009, especially since the accounting gains made from the falling value of its own debt will probably decline.

"Barclays' peers continue to be more prudent in their write-downs and in our view this remains a primary concern for the stock," Sage said.

He added that given the low underlying profit and the continuing deterioration in asset quality, he remained unconvinced over the bank's ability to resume dividends this year.

Without bonus, the dividend remains the only meal ticket for the insiders, the shares holding by officers and directors is unavailable, but it's likely they'll do anything to reinstate that dividend, so the talking up, but just as the first half shows, talk is cheap, as the bank takes big impairment hit and putt's it's money into provisions for credit losses, under the weight of a burgeoning balance sheet.

The bank's balance sheet, meanwhile, ballooned 67% to 2.05 trillion pounds, driven by derivatives moves, growth in lending and the impact of the weak pound.

Risk weighted assets, which help determine how much capital a bank needs to hold, rose 22% to 433 billion pounds, though the bank, which raised 13.6 billion pounds of Tier 1 capital during the previous 12 months, said its capital ratio still stood at 9.7% at year-end, slightly ahead of previous guidance.

Keeping up with the defaults and derivatives is one move the impaired bank cannot hide.

During the year, the bank's impairment charges and other credit provisions totaled GBP 5.42 billion, a 94% upside from the previous year. The impairment charges included GBP 1.76 billion arising from US sub-prime mortgages and other credit market exposures.

Another one is cutting 4500 jobs. 

But the cheer leading never ends.

“As long as they don’t need any more capital, then you have to say that Barclays is looking very cheap,” said Alan Beaney, who helps manage $2 billion at Principal Investment Management in Sevenoaks, England. “What you are starting to see, and it takes a brave man to say it, is a bottom in the banks.”

But that's just it, THEY DO NEED MORE CAPITAL Alan you beaney! Just becausethey take it on the sly doesn't mean they don't. Not satisfied to be wrong about Barclay's, this fool calls a bottom in the banks. Wanna bet on it Alan. We did say talk is cheep didn't we.