Barclays(BARC.L) - Signals Bad Debts May Be Past Their Peak

Britain's top bank, Barclays, signalled bad debts may be past their peak, Strong investment banking underpinned profits, although Barclays shares dipped on concern its unit will be unable to sustain its growth and costs are rising.

Losses on bad debts have soared for banks around the world this year as unemployment rises and economies slow, replacing writedowns on toxic assets as the main worry, and few banks have yet voiced confidence they are through the worst.

Barclays Plc reported a third-quarter pretax profit of 1.56 billion pounds, down from 2.8 billion a year ago, largely due to losses on the value of its own debt and other one-off items. Excluding those, profit in the first nine months of the year more than doubled to 4.4 billion.

"Barclays shares have done fantastically well in the last year, but there's nothing in these numbers to make you say 'this is going to push it on from here'," said Colin Morton at Rensberg Fund Management. He owns both HSBC and Barclays shares.

Both HSBC and Barclays are emerging as relative winners from the credit crisis and have avoided taking direct government cash, unlike rivals including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.

Technical Outlook

I posted this chart a few months back(please check the archive) and I explained that we were witnessing an inverted head and shoulders formation with a downside target of £2.65.

The resistance at £3.90 held and we have been trading weaker ever since.