Barclays profit falls on writedown

By Steve Slater

LONDON (Reuters) - Barclays (BARC.L: Quote, Profile, Research) reported a 33 percent drop in first-half profits after taking a 2 billion pound writedown on the value of risky assets, and said challenging market conditions are likely to last through 2009.

Britain's third biggest bank said on Thursday its pretax profit in the six months to the end of June was 2.75 billion pounds, down from 4.1 billion a year before but ahead of an average analyst forecast of 2.63 billion.

Barclays shares were flat at 369 pence by 9:07 a.m., in line with a weaker broader share market.

"There may be some questioning over the sustainability of the strong underlying BarCap performance, coupled with continued questioning over the prudence of BarCap writedowns," said James Hutson, analyst at Keefe, Bruyette & Woods. "Nevertheless, the good underlying performance should be reasonably well received."

Half-year profits at Barclays Capital fell 68 percent to 524 million pounds, as it absorbed a 1.98 billion pound writedown on its credit market exposures, net of 852 million on the debt it carries.

Bob Diamond, head of BarCap, said that reflected resilience in tough markets, but tough conditions were set to last.

"Our operating hypothesis is that we're not going back to markets like 2005 and 2006, we're going to be in more challenging environments for the balance of 2008 and really throughout 2009," he told reporters on a conference call.

BarCap had estimated a 1 billion pound net writedown for the first quarter and wrote down a net 1.6 billion pounds last year.  Continued...