The levels of assets, risk weighted assets and adjusted gross leverage as at 31st March 2009 are substantially consistent with the positions as at the end of 2008. We remain committed to the reduction of leverage over time.*
* Just not yet, that’s all.
And in the meantime, keeping things “substantially consistent”:
First quarter 2009 results included net losses from credit market writedowns of £2,152m (2008: £1,006m). Gross writedowns were £2,613m (2008: £1,979m) before related income and hedges of £182m (2008: £270m) and gains on own credit of £279m (2008: £703m).
Out today: Barclays Q1 2009 interim management statement.
Underlying those writedowns is a broad increase in the bank’s loan loss rate (annualised at 131bps – as forecast) which Barc expects to deteriorate further:
During the rest of the year, we expect the loan loss rate to increase further across all business lines and the rate of increase across our international books to be higher than our UK books. Our planning assumption for the 2009 annualised loan loss rate, which remains dependent on many external economic factors such as unemployment levels and asset values, is at the higher end of our indicated range of 130 — 150bps.
The unspoken point here being that it may well go higher.
As usual though, for the more idiosyncratic credit impairments, taken on available for sale securities, we have to turn to the appendices for information.
Barclays’ trading update is five pages long (four, excluding legal disclosures).The appendix is 15 pages long.
The gross losses, which included £754m (2008: £598m) in impairment charges, comprised: £1,225m (2008: £1,830m) against US RMBS exposures; £884m (2008: £77m) against commercial mortgage exposures; and £504m (2008: £72m) against other credit market exposures.
Offset by…
related income and hedges of £182m (2008: £270m) and gains of £279m (2008: £703m) from the general widening of credit spreads on issued notes measured at fair value through the profit and loss account.
There are no dramatic surprises as far as Barclays CDO positions go. The value of the holdings continues to deteriorate. The figures are worth reading over just to remember how poisonous these things have been, however:
During the period ABS CDO Super Senior exposures reduced by £127m to £2,977m (31st December 2008: £3,104m). Net exposures are stated after writedowns and charges of £149m incurred in 2009 (2008: £495m). There were no hedges in place at 31st March 2009. There were paydowns of £38m in the period, offset by an increase of £59m resulting from weaker Sterling.
Consolidated collateral of £8.5bn relating to the CDOs that were liquidated in 2008 has been sold or is stated at fair value net of hedges within Other US sub-prime, Alt-A and CMBS exposures. The notional collateral remaining at 31st March 2009 is marked at approximately 9% of its original notional value. The collateral valuation for all ABS CDO Super Senior deals, including those liquidated and consolidated in 2008, is marked at approximately 29% (31st December 2008: 32%).
There are a host of other, second-order toxic asset exposures – £2.6bn of “other” subprime (Q4: £3.4bn); £3.1bn Alt-A (Q4: £2.4bn); £10.9bn CRE loans (Q4: £11.5bn); £7.2bn of leveraged finance loans (Q4: £10.3bn) – which have both declined in value and seen disposals, but the really big question with Barc’s structured holdings continues to be the bank’s exposure to monoline insurers.
Barc currently has:
- £3.8bn of CMBS wrapped by monoline insurance (underlying asset value, £1bn, exposure after CVA, £1.9bn)
- £2.6bn of RMBS wrapped by monoline insurance (underlying asset value, £300m, exposure after CVA, £1.5bn)
- £20.9bn of CLOs wrapped by monoline insurance (underlying asset value £14.2bn, exposure after CVA £5.4bn)
- Not to mention, £1.7bn notional, protected by insurance written by CDPCs.
Of those residential and commercial mortgage wrapped positions, £4.6bn (notional) is currently protected by monolines that have already been junked by the rating agencies. A further £674m (notional) is wrapped by monolines teetering on the brink of investment-grade status, leaving just £69m still AAA-wrapped. For the huge CLO positions, £7bn (notional) is insured by junked monolines, £4.8bn by those rated A/BBB and £8.2bn by those still rated AAA.The potential exposures, net of underlying collateral value (in itself, not at all cast in stone) and existing writedowns, therefore being £1.4bn to junk monolines, £1.2bn to those rated A/BBB and £2.7bn to those still rated triple A.The problem in all of this is that under any stress tested scenario run by the FSA, we here at FT Alphaville don’t see how the already junked monolines could be seen to continue existing, let alone insuring structured finance positions with a minimum CVA.
Take already-junked monolines out of the equation and Barc has to take an instant £4.5bn writedown. And that’s not even considering the further CVA hits Barc would have to take on its other better-rated-monoline insured positions.
Other banks have sold off their structured finance positions at great losses in an effort to clear the decks. Barclays has sat stubbornly still. That leaves them exposed to both the possibility of further market ructions and potential big “black swan” shocks (in the form of a monoline going under, for example) but also the possibility of quarter after quarter of credit impairments dragging on profits. “Substantially consistent” with the past eighteen months of performance is one thing Barclays most definitely does not want to be.
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Barclays has moved its 8am BST conference call to 10am, so as not to clash with Lloyds.
As at 08:30am, Barc was trading up 4.17 per cent at £3 a share.