Barclays to write down 8 billion pound

Financial services major Barclays today said it will write down 8 billion pound relating to credit market exposures in Barclays Capital.

"When we announce our results for 2008, we will report a profit before tax for the year well ahead of the consensus estimate of 5.3 billion pound. The profit is struck after all costs, impairment and market valuations," Barclays Capital Chairman Marcus Agius and Chief Executive John Varley said in an open letter to shareholders and employees.

The profits would also include gross writedowns of some eight billion pound (5 billion pound net of own credit, hedging and attributable income) relating to credit market exposures in Barclays Capital.

However, it added, "Our starting point is that Barclays has 36 billion pound of committed equity capital and reserves, we are well funded, and we are profitable."

A credit writedown is a reduction in the value of an asset as it is carried on a company's balance sheet. As these losses must also be reflected on the income statement, credit writedowns result in massive losses.

Further, the letter stated that the amount is arrived at by applying year-end valuations and mark-to-market norms. It is derived on a consistent basis and includes the comparable numbers for the first half of 2008, which were 3.3 billion pound gross and 2 billion pound net.

"In the interests of clarity and transparency, we are reporting these numbers on a gross and net basis. We will provide extensive details as to the level of writedowns and marks by asset class when we report our results on 9th February 2009," the bank added.