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The Barclays Bears

• Robert Peston
• 8 Nov 07, 05:00 PM

On Tuesday I was rung up by a couple of mates in the City to congratulate me on a scoop they had heard I was about to broadcast on the Ten O'Clock News.

They informed me that they had been informed I would reveal an enormous financial black hole at

I was simultaneously amused and slightly alarmed - because I wasn't planning to broadcast any such thing.

What the incident shows is how jittery the City has become about the prospects for our biggest banks. And what it may also show is that some unscrupulous speculators are taking advantage of the jitters to spread false rumours - in an attempt to profit from the manipulation of share prices.

Driving down Barclays鈥� share price right now would be to go with the flow. The stock has dropped 17 per cent since the beginning of last week, it is down 39 per cent from a high for the past year and has fallen more than 4 per cent so far today.

So I thought I had better find out just what is going on. Now the first thing to point out is that if Barclays' profits and prospects were massively different from its previous public guidance, it would have needed to make an emergency statement, under listing rules. That it hasn't made such a statement should be reassuring.

Point two is that the media and punter obsession with Barclays is to miss something quite big 鈥� which is that shares in have actually been falling further and faster (off almost 7 per cent today, down 19 per cent over nine days, and a staggering 44 per cent below a 52-week high).

If you are a bear of the banks, the disproportionate fall in RBS stock is rational 鈥� because it has the to digest and because it has far greater exposure than Barclays to the softening consumer economy in the US.

Point three is that although Barclays has a large global investment bank in , whose activities are too opaque for comfort, it鈥檚 probably not as deep in the merde as a , a or a

So although Barclays is bound to suffer writedowns on the private-equity leverage and sub-prime securitised rubbish that's stinking away at almost all the banks, its losses may well turn out to be less than its peers and less than the spivs and speculators expect.

What's more my sense is that the rest of Barclays is running well, such that profit growth in other substantial operations will be strong.

So when Barclays updates its shareholders about what鈥檚 really going on, there is a fair chance that its shares will bounce 鈥� and that the bears will be squeezed (which doesn鈥檛 feel like a tragedy).

But there鈥檚 a 鈥渂ut鈥�. I鈥檓 not sure how much of a bounce it will turn out to be. First, the opacity of precisely how Barcap makes its money will continue to unsettle investors, in market conditions where opacity is attracting a massive market discount.

Second, Barcap made a fortune out of the credit bubble and it鈥檚 fair to ask whether it can prosper now that the credit-bubble has been pricked.

Finally, all banks will feel capital-constrained in the coming months, as we progress through this second phase of a financial-markets downturn.

First we had the liquidity drought of the summer and early autumn. Now, with growth slowing in the US and infecting the rest of the world, we are moving into a phase of losses on loans, of an inevitable morning-after hangover for almost all banks.

They provided the wrong credit to the wrong people at the wrong time. They mispriced the risk of lending, they banked profits on loans which weren鈥檛 real profits, and now they are having to write those profits off.

So for many months to come, all British banks will want to conserve their capital. They will lend less. Their earnings will grow less or even stagnate. And their share prices will languish.

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