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April 5, 2007    

Barclays sells low-performance sub-prime credit unit

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by Elaine Frei
Barclays sells low-performance sub-prime credit unit

In an attempt to reduce its exposure to bad debt, Barclays Bank (LSE: BARC; NYSE: BCS; TYO: 8642) has sold the majority of its Monument sub-prime credit unit to US-based Compucredit (NAS: CCRT) for £390 million ($769 million), around £100 million less than its book value. Monument, part of Barclaycard, was the bank’s lowest-performing division. With the sale, Barclays held on to what it called “higher quality accounts” in Monument’s portfolio. Those accounts are worth around £130 million.

The sale announcement was made only a few days after Barclays said that it will purchase US sub-prime lender EquiFirst for $76 million, much less that it first offered. The sale by Barclays also comes just days after US lender New Century Financial filed for Chapter 11 bankruptcy due to a rising tide of mortgage defaults in its sub-prime mortgages.

Barclaycard has 16.2 million customers globally and had racked up bad debt of £1.5 billion dollars in 2006, while bad debt at Barclays Bank overall was up 37 percent to £2.15 billion last year.

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