Writedowns dent more bank profits

By Steve Slater

LONDON (Reuters) - Profits fell at a slew of European banks as they took more writedowns on risky assets and braced for a tough outlook well into next year, but shares in Barclays and some others rose on optimism they can take advantage of the turmoil.

Barclays (BARC.L: Quote, Profile, Research), Dresdner (ALVG.DE: Quote, Profile, Research) and KBC (KBC.BR: Quote, Profile, Research) unveiled over $5 billion (2.5 billion pounds) more in asset writedowns on Thursday, and predicted tough conditions would persist but could provide opportunities.

Barclays shares jumped 3.6 percent by 11:11 a.m. despite its profits being hit by a $4 billion writedown on risky assets and its prediction of challenging markets continuing through 2009. The DJ Stoxx European banking index was up 0.6 percent.

The bank's income proved resilient and investors were encouraged that the bank can grab market share as rivals retreat from areas like UK mortgages or U.S. investment banking.

"This is as tough an environment as we have operated in and I have been 25 years in the business ... it's been difficult to manage," said Bob Diamond, president of Barclays and head of its Barclays Capital investment bank arm.

Austria's Raiffeisen International (RIBH.VI: Quote, Profile, Research) also said it was well positioned in the downturn. Its second-quarter net profit rose 49 percent as growth continued in the emerging markets of eastern Europe it targets and it held bad debts in check.

But others were less resilient as financial market turmoil continued during the second quarter.

Dresdner swung to a second-quarter 566 million euro operating loss from a 427 million euro profit a year ago, hurt by its investment banking business and 286 million euros in writedowns on investments hit by the credit market crisis.  Continued...