Barclays reported a total of £1.5 billion in write-downs associated with US subprime mortgages between June and October this year, reassuring investors who had feared far higher losses.In an unexpected trading update, the bank announced that it had made a total of £600 million write-downs in the third quarter, and a further £900 million in October.
Over the four-month period, Barclays made a total of £700 million write-downs on exposure to positions in high-grade collateralised debt obligations (CDOs) based on asset-backed securities (ABSs) of US subprime mortgages, and another £400 million on mezzanine exposure. Trading book losses on ABS and CDO holdings, and losses on its US subprime whole loan portfolio, led to another £400 million, totalling £1.5 billion.
The bank said the losses were offset by accounting gains on its debt - wider credit spreads reduced the carrying value of its £55 billion of debt, leading to gains of £400 million over the four months. The total net write-down is therefore £1.3 billion, the bank said.
Barclays' shares were suspended from trading last week after falling 9% on rumours of massive write-downs. At the time, the bank denied the rumours and said it would announce its losses with its third-quarter results at the end of this month.
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