Trading in shares of Barclays, the third biggest bank in Britain, were temporarily suspended today after their price dropped by more than 9.0%.
Dealers said the stock price tumbled on rumours that the group was to announce large-scale write-downs to its assets owing to the global credit squeeze, which is a consequence of the US home loan crisis.
Barclays share price shed 9.1% to 442 pence in morning London trade as speculation concerning the bank swept across trading floors. At midday Barclays stood at 454 pence, down 6.63%.
Traders said the decline reflected rumours that like US banking giant Citigroup, Barclays would imminently confirm it had sustained heavy investment losses as a result of the sub-prime mortgage crisis and subsequent global credit freeze.
A Barclays spokesman said there was ‘absolutely no substance’ to the rumours.
A company spokeswoman meanwhile said the bank's shares were automatically suspended for about five minutes as they had hit a technical low point.
Some analysts, meanwhile, were sceptical about the speculation.
'I think Barclays will make their (earnings) numbers. Obviously the market disagrees with me, and there are a lot of people taking out short positions (selling), but I think they're going to find themselves on the wrong end of a hiding,' said Magnus Mathewson at stockbroker Hichens, Harrison.
The banking industry has been hit by a surge in defaults against US sub-prime mortgages, taken out by less creditworthy borrowers. That has slashed the value of sub-prime mortgage-backed securities held by banks and other financial institutions worldwide.
In turn, commercial banks are less willing to lend money to each other.
Citigroup, the world's biggest bank, last Sunday revealed that it expected losses of up to $11 billion related to problems in the US sub-prime mortgage sector.
The news led to the resignation of Citigroup boss Charles Prince.
