* Q3 underlying pretax profit 1.3 bln pounds, up 8.5 percent
* Barclays Capital Q3 revenue sags to 2.83 bln pounds
* 2010 bad debts to fall 30 percent to near 5.7 bln sterling
* BarCap October income in line with Q3, November better
* Shares up 2.8 percent
(Adds comments, details, updates shares)
By Steve Slater
LONDON, Nov 9 (Reuters) - Barclays sees bad debts falling by
almost a third this year, a better-than-expected recovery
filling a profit hole left by continued weakness in the British
bank's investment banking arm.
Europe's seventh biggest bank said it has a healthy capital
position and sees no need to tap investors for cash to meet
tougher global rules. The outlook provided in its third quarter
results helped lift its shares 2.8 percent to 293.5 pence,
outweighing concerns that investment banking division Barclays
Capital (BarCap) has lost momentum.
The bank said it was confident of achieving a core Tier 1
capital ratio of 11.5 percent by the end of 2013, up from 10
percent now, and above most rivals.
"BarCap revenues are a disappointment, albeit in line with
managed down expectations, but the impairments are massively
ahead of guidance. On capital ... it's a pretty firm rebuttal of
the ongoing speculation on whether they need to raise capital,"
said Ian Gordon, analyst at BNP Exane Paribas.
Barclays, whose chief executive John Varley will be
succeeded by investment bank boss Bob Diamond at the end of
March, said on Tuesday it made an underlying July-September
pretax profit of 1.27 billion pounds ($2.05 billion), up 8.5
percent on a year ago.
Barclays has emerged as one of the relative winners from the
financial crisis after avoiding taking taxpayer cash and picking
up the U.S. operations of Lehman Brothers at a knock-down price.
But BarCap has lost some of its shine.
The unit's income fell to 2.8 billion pounds in the third
quarter, down 14 percent from the previous quarter. That was its
weakest quarter since the Lehman deal in late 2008, adding to
fears normalised quarterly income will be below 3.7 billion
Analysts had expected income to drop to between 2.8 billion
and 3 billion pounds after weak results from rivals.
BarCap's income in October was consistent with the run rate
of the third quarter, but November has started better,
"We've not changed our perspective on BarCap's top line
income generating capability as a result of a couple of weak
quarters," said Chris Lucas, Barclays finance director. "Market
conditions are challenging ... but we're confident that our
income run rate will return."
BANK LEVY CHARGE
Barclays expects to pay about 250 million pounds from 2012
onwards under an annual UK tax that will be applied to bank
assets, Lucas told reporters on a conference call.
Bad debts in the first nine months were down 31 percent to
4.3 billion pounds and it now expects impairments to fall 30
percent this year to near 5.7 billion from 8.1 billion in 2009.
It had previously said impairments would fall by 15-20 percent.
The bank racked up 198 million pounds in losses on bad
Spanish corporate loans in the quarter, down from 553 million in
the first half of the year but enough to drag Barclays Corporate
to a loss.
Barclays said it was "well equipped" to deal with regulatory
changes as tougher global capital rules are implemented.
It expects risk-weighted assets to rise by about 150 billion
pounds under new Basel III capital rules, but expects to cut
that by about one-third by taking mitigating action, such as by
shifting away from capital intensive business lines.
Barclays is one of the last banks to report third quarter
results and echoed trends seen elsewhere.
Investment bank revenues have been broadly flat or slightly
down from the second quarter, while rivals including Lloyds,
HSBC, BNP Paribas have said bad debts are falling sharply.
The bank said it has has set aside about 4 billion pounds to
pay BarCap staff, or 43 percent of this year's income, up from a
ratio of 42 percent at mid-year.
Revenues from fixed income, currency and commodities (FICC)
fell 14 percent from the previous quarter and equities and prime
services dropped 36 percent, while investment banking and
advisory income rose 9 percent.
Barclays said statutory pretax profit was 327 million pounds
in the third quarter, down over 1 billion pounds, as it suffered
a 947 million pound charge for marking down the value of its own
debt, almost reversing an accounting gain it made on the debt in
the second quarter.
Its underlying pretax profit was 4.27 billion pounds in the
first nine months of the year, up 4 percent on the year.
(Additional reporting by Sudip Kar-Gupta; Editing by Dan Lalor
and Andrew Callus)
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