Barclays have today announced in an open letter to customers, employees and shareholders that they are in a good position financially and are expecting to report a better than expected profit of £5.3bn for 2008. Furthermore that they are to bring forward the publication of their performance in the interests of transparency. The news saw a rally in Barclays share price of 36% to 69.7p. The FTSE also rallied on the news up 156.54 at 4,209.01.
This all sounds like good news to me as a Barclays customer. Even the news that Barclays is to write-down £8bn does not sound like bad news to me, (relatively speaking of course). It sounds to my ears that Barclays have been through their entire portfolio, identified the toxic debt and taken the decision to write it off so as to draw a line under all of the situation. They have "come clean" over the extent of their liabilities, and cleared some of the fog of uncertainty. The fact that Barclays ends the year in "profit", with the help of some heavy corporate refinancing and restructuring sounds good to me because it has done so out the hands of public ownership.
If you have read this Blog before you will know I have absolutely no background in finance... but I have, I think, as good an understanding as any layperson. To me, Barclays looks like the only UK bank positioned to trade in the post credit-crunch world. Though, that £8bn will need to be paid off, it has addressed and will price this into its offerings. Its customers and shareholders can understand the extent of it's liabilities.
The challenge for the Government is to now insist through its own bank ownership that the banks they own get themselves into a similar position so that these banks can trade their way back into a position of consumer confidence.