Thursday, June 04, 2009

Barclays: drowning bank or misplaced fears?

When the banking industry was in the throes of its most turbulent period for a spell, banking analysts, watchers and investors fully expected Barclays, a big player in fixed income to be among the first to keel over. Barclays managed to fight itself out the corner by signing up foreign investors; revealing strong financials and generally talking positive almost daily. It even resolved to sell its ishare business (the largest provider of some of the more progressive investment products e.g. efts, in the market today I believe). As a final vote of confidence the FSA gave it a pass after due some tough stress tests. As a result, its price recovered from a historic 47p low to a high of £3.21 early this week.

Then Abu Dhabi decided that its long-term investment was short-term and it was cashing out at some hefty profit along with a v funny FT missive. Then it announced that Timasek had sold out at a massive loss in January and it was closing its final salary pension scheme. At of course its now looking to sell its whole BGI business. That business is almost risk-free and earns Barclays steady though not proportionately huge revenue. So why sell now when Barcap may see lower revenues due to more limited activities (and yes more opportunities)?

In the short run, I expect the price may touch a low of mine, but long-run the bank seems to be strong and remember it did go through a stress test by the regulator...

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