Carburton Street, London -- Barclays (LSE: BARC), the UK's fourth biggest bank, is doing itself no favours at all by refusing to make an official statement on its exposure to the collapsed US energy company Enron (NYSE: ENE). Speculation over the true level of loans that the bank has extended to Enron and it's affiliated companies range from £300m, as reported in the Sunday Telegraph, to just £87m. This latter figure was revealed after the energy trader filed for Chapter 11 bankruptcy protection on Sunday.
The events of the Enron saga overshadowed Barclays' trading statement, which was not a bad report on the health of the bank. Total operating income grew in the third quarter over the equivalent period last year and this was largely because of the group's diversified portfolio of business. The acquisition of Woolwich has boosted mortgage volumes at a time when the robust growth in the housing market has seen an increase in demand for home loans. Barclaycard, the credit card business, has also gained from strong consumer spending and this was due to growth in average "extended credit balances" - a euphemism for borrowers taking longer to pay their bills.
The rest of the bank's businesses look in reasonably fine fettle and continuing cost savings should allow the bank to achieve its targeted cost savings of £1.15b for the four year period ending 2003. In terms of providing for bad and doubtful debts, Barclays plans to set aside £1.1b. This is expected to cover debts that go sour at Business Banking and also at Barclays Capital, its investment banking division. Barclays does not expect bad debts at its Personal Services, Woolwich and Private Clients to be any worse that in the first half of 2001.
This still leaves the thorny issue of Enron, which will continue to dog Barclays until it comes clean over how much it is exactly owed. If the amount is indeed inconsequential then this must be a testament of the bank's focus on "higher quality lending" that it pointed to in today's trading statement. But if the amount is not insignificant, then the bank has a duty to let the market, and not just a priviliged few, know.
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