Barclays Q1 profits down as market turmoil bites

By Steve Slater

LONDON (Reuters) - Profits at Barclays Plc, Britain's third biggest bank, were well below those of a year earlier in the first quarter after its investment bank and fund management arms were hit by tough financial market conditions.

In comments released before the bank's annual shareholder meeting on Thursday, the bank said profits at Barclays Capital and Barclays Global Investors were "well below" the strong profits of a year ago, but both businesses were profitable.

Barclays said this would include any writedowns it needed to make, but did not comment on whether it has taken or will take any more hits, amid concern it faces billions more in losses after rivals have written down the value of their risky assets.

Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) announced a $5 billion writedown for the first quarter on Thursday and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) has said it could take a hit of nearly $12 billion.

By 4:30 a.m. EDT Barclays shares were down 2.3 percent at 445 pence in a weak UK bank sector, extending their fall this week to 10 percent.

Alex Potter, analyst at Collins Stewart, said the update constituted a profit warning, with that he called "dire" conditions in March indicating average 2008 earnings forecasts are too high.

"If current credit market conditions persist, the (earnings) miss is already double digit and likely growing fast," Potter said in a note, cutting his rating to "sell" from "buy".

Other analysts were more reassured in terms of earnings, but said the update lacked detail. The indication that any writedown for BarCap would be modest was positive, but it would include the gains on debt BarCap carries on its books, they said.