City told it’s ‘investing in the dark'

They broadly welcomed assurances from Barclays that it did not need to raise fresh capital, but questioned how the bank could be so sure given the state of the financial markets.

They also demanded to know how Barclays has avoided the carnage suffered by rivals such as Royal Bank of Scotland, which last week admitted it will make the biggest ever loss by a British company.

Analysts are concerned that chairman Marcus Agius and chief executive John Varley are being too optimistic about the quality of Barclays' investments and loans, and will eventually be forced to book bigger losses.

Bruce Packard of Evo Securities said: "Barclays is fighting its ground and reiterating profit and capital ratios. We would like to know how it has avoided the losses reported by others. Certainly buying a subprime lender (EquiFirst) and bidding for ABN and then buying a Russian bank (Expobank) do not seem to be the actions of a bank battening down the hatches in preparation for a 50-year storm."

Mamoun Tazi at MF Global Securities said the letter from Barclays top brass "allieviates the concerns the market had about Barclays needing more capital for now", but he still advised clients to sell.

Alan Beaney, who helps manage $2 billion at Principal Investment Management, said: "Until we see all the full-year numbers, we are investing in the dark."

Ian Gordon of Exane BNP Paribas said: "There will still be scepticism in the market, but it's a very powerful statement." He said Barclays' capital position was weaker than that of its peers but that it was "adequate, and adequate is what counts".

If Barclays raises capital before the end of June, investors from Qatar and Abu Dhabi who provided funds last year in exchange for a 32% stake would receive more shares for no extra cost, diluting other investors.

"If Barclays is able to avoid capital-raising until after the end of June it would unwind much of the damage done in the past week, as it would avoid triggering the anti-dilution clauses in the Middle East contracts," said Gordon.

Simon Pilkington at Cazenove said the rise in share price was a "relief rally", while James Hamilton at Numis Securities said the market "was still not satisfied" over the level of disclosure.
Barclays said it will provide further details when it publishes results on 9 February.

The five big questions for Varley:
How exactly has Barclays avoided the huge losses suffered by its rivals?

What are the assets held by Barclays Capital and how are you valuing them?

If you can state writedowns will be £8 billion, why can't you say how you reached that figure?

Without such details, why should the market trust the figures?

How can you be so sure you will not need more capital in the future months?