Banks offer cautious outlook

February 14, 2002 Posted: 0911 GMT

LONDON (CNN) -- Europe's biggest banks are offering little hope of a recovery this year, as they set aside more money for possible bad loans.

Banks, which offer services to corporations and small savers and lenders, have been forced to put aside money as customers find it increasingly difficult to pay back loans as the global economic slowdown accelerated after the September 11 terror attacks.

Uncertain economic conditions and weak equity markets have also hit profits at corporate banking and investment banks, which advise clients on mergers, acquisitions and share offerings.

 "Weak conditions, seen in the first half of the year, continued and significantly worsened in the second half of the year," ABN Amro, the biggest Dutch bank, said on Thursday.

"The tragic events in the United States in Septmebr have had a substantial impact on the global economic outlook and consumer confidence. The collapse of major corporates in the fourth quarter have further aggravated the situation."  

The bank said its provision for possible bad debts had doubled last year to 1.43 billion. ABN is one of the biggest lenders to the troubled airline sector and has invested in crisis-hit Argentina and bankrupt U.S. energy trading group Enron.

"The weak market conditions seen in the second half of 2001 are expected to continue into 2002," said the bank.

ABN posted net operational profits of 2.36 billion, down from 3.097 billion the year before. A Reuters poll of analysts had expected operational net profit, before the sale of a U.S. subsidiary and restructuring charges, between 2.2 billion and 2.36 billion.

Its Swiss peer, UBS said net income fell by 24 percent to  1.106 billion Swiss francs ($652.1 million) in the last three months of 2001. Analysts had forecast a fourth quarter net profit of 899 million francs.

But Switzerland's largest bank sounded a cautious note on 2002, saying: "As prospects for an economic recovery recede to the latter part of the year, the potential to outperform 2001 is limited."

UBS, the world's ninth-largest bank by market value, boasted that it had "no material, unhedged exposure to any of the widely publicised international corporate default cases of the last few months."

Britain's Barclays, the country's fourth-largest bank, said on Thursday it was cautiously optimistic about business prospects and had increased its bad debt provisions by 35 percent to £1.149 billion ($1.65 billion).

Finance Director John Varley said Barclays' total exposure to Argentina was £300 million.

Pretax profit rose 9 percent to £3.608 billion. This was in-line with analysts' expectations for profits of £3.5 billion to £4 billion.   

The bank also announced plans to split its shares, which are currently trading around the £22 mark, on a four-for-one basis making them more affordable for small investors.

Barclays' stock rose 1.6 percent to 2245 pence in early London trading on Thursday. ABN gained 0.8 percent to 19.80 in Amsterdam, while UBS climbed 1.8 percent to 78.90 Swiss francs.