Annoying isn’t it, Mr Varley. You broadly hint that Barclays can avoid a rights issue, nothing ruled out, several options to boost capital, writedowns likely to be lower than your rivals, etc etc. Then one of those peers promptly opts for an almost excessively prudent tack and you’re right back in the frame.
RBS, with its 4 per cent core Tier 1, was a clear case for a rights issue. But the move by HBOS, on 5.7 per cent, to bolster its capital base for a forthcoming downturn is more problematic. Will the market, and the regulators, buy the line that exposed to the same macro pressures Barclays’ is comfortable sitting on its 5.25 per cent equity Tier 1, while its rivals up theirs to plus-6 levels?
In reports to clients on Wednesday, Lehman noted the implied pressure to raise ratios across the sector, while Ian Gordon, analyst at Exane, thinks Barclays is sure to follow its peers. Stand by for the Sunday papers perhaps.
As is now traditional for a UK bank’s rights issue, precise details of the amount to be raised, GBP4bn, appeared in the Sunday newspapers, followed two days later by a formal announcement to the Stock Exchange and shareholders.
But having got its AGM out of the way last week, Barclays now has a clear run through to the interim management statement on May 15. This mooted capital raising could keep the Sundays in stories for a couple of weeks.
The HBOS move suggests a flourishing herd instinct in the UK banking sector, argues CreditSights. But it’s one that raises the question of whether banks are being stampeded into issuing capital that won’t be needed in the longer term. Will the shareholders being tapped for capital find it being handed back to them in a couple of years time? Or will cushioned management use their firepower to seek out potentially destructive deals when the banking backdrop becomes more rosy?
It rather depends if the welcome give by regulators to higher ratios proves transitory, or if their current worries persist.
In the meantime, can Barclays hold out in a world of six-plus-sized UK ratios and scrip dividends? And if it can’t, then its shareholders might prefer that it jump on the capital wagon sooner rather than later.
Related links
Barclays look at balance sheet options – FT.com
Europe’s best banks – Lex