Barclays statement here.
Analyst slides here.
Skeptical Alphaville take here.
Keep hitting refresh for all the latest below. Be patient… apologies in advance for typos.
Oh – and of course – you can listen to the call yourself, here.
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9:27 Call scheduled to start at 9:30… disturbing jazz in the meantime.
9:28 We say “jazz” but in fact its the same four bars played over and over… so more like Philip Glass or something.
9:30 We’re off…
“The capital raisign will allow us to meet our core capital requirements… meet the FSA’s revised target capital ratios.”
They’re “strenthening links with existing shareholders” and “introducing one new shareholder”
A “diversification strategy”.
A rubbish strategy.
“We announced on 13th Oct intention to meet new capital reqs. put in place by FSA… we said at that time that we wanted to increase our tier 1 ratio. Then our tier 1 ratio was a little over 9% and our equity tier 1 ratio was 6%. We said that our capital raising would target both” (IE. raise new capital and new equity).
The board apparently felt this needed to be done with some urgency. Go figure.
The instruments will convert no later than June 2009.
QIA is investing a further £2bn
Challenger (Chairman of QIA’s family outfit) is investing extra £300m.
Sheikh Mansour Bin Zayed Al Nahyan is investing £3.5bn … he’s the new investor.
9:38 A futher £1.5bn of converts is being made available for other institutional investors via an accelerated bookbuild through Caz and Credit Suisse.
9:40 This increases BARCs tuberculose “already healthy” capital ratios to…
Tier 1 11.3%
Pro forma equity tier 1 at 7.6%
There’s now some detail about the terms of the RCIs… go check the slides for more detail.
24th Nov…. general meeting for shareholders to seek approval… issuance of notes on 27th Nov.
9:41 Now over to CFO Chris to discuss the results…
You can read the interim management statement here.
Barcap results ahead of expectations… profit before tax is well ahead of last year.
Credit writedowns of £1.2bn are offset by gains booked by writedowns on BARC debt of £1.1bn (magic of FAS 157).
3Q of results impacted by estimates of LEH impact as well as the above writedowns. Excluding these items, income is ahead.
An increase in credit market exposures of £1bn – inherited from LEH. Details of all BARCs structured holdings are detailed in an appendix to the statement.
Update in October trading: A reversal in the fair valuation of BARC debt (which allowed the group to book a £1.1bn gain) bank debt spreads have narrowed – one assumes this will mean BARC will have to take a hit in the next results.
9:49 Back to John.
And it’s question time.
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JP from UBS: Both of you referred to benefits of LEH transaction. Can you quantify these figures? At the time we were looking at negative goodwill of £2bn
Chris: At the time, our estimate was $2bn – and still is.
JP: And on dividend policy, moving to a quarterly policy…
It seemed right to us in response to the FSAs new ratio requirements to pass the dividend for 2008. It’s right for us to keep an eye on the environment and not come to a rapid conclusion about what the divi shape and size should look like when we come to that. We want to keep our powder dry on that…
Chris: part of the reason we chose for going quartlery was to smooth out the capital impact of the divis… a smoother quarterly payment with the most variability being in the final payment.
James Eden, Exane: A “strange decision” to turn down Govs offer of 12% coupon compared to the current scheme. “Can you confirm if management does intend to pay itself bonsues, and was that a consideration?”
A: BARC, “in common with every other bank in the world” is giving “careful consideration to the bonus issue”.
Was cap raising chosen solely with this in mind? Absolutely not, decision was taken by the board, not by the executives, and was taken with the interests of the company as a whole.
Chris: Where the RCI sist in the capital structure is important. The coupon is tax deductable. Although its at 14%, after tax that’s 10% and then with the warrant its around 13%, which compares favourably with the government option.
James Eden: But it sticks until around 2019, whereas the other banks are paying down in a couple of years…
A: (Defensive now) “Well we cant comment on what other banks are doing… but you know as well as I do what this is about.”
Simon Samuels, Citi Do you think your economic capital requirements are going to broadly hug the regulatory capital requirements… what about at Barcap where the gap here was previously wide…
There is some value to using the economic capital model, but we have to take consideration of the revised regulatory capital model…
On the strategic positioning of BARC: “there are only 2 or 3 global competitors”
“Even in the most difficult environments – and this is the most difficult environment – we’re going to hold on to market share.”
Mike (didnt catch where from): “Mobilising an extra £1.5bn equity resources” what is meant by this? And what’s the trading outlook for LEH? And what’s the situ in Spain (after Santander’s efforts).
On LEH: Cost synergies… “we’re also managing hard the risk weighted asset side of the balance sheet, and looking at how we can maximise returns on RWAs..”
Rich Ricci (CEO of LEH businesses)… “Given the way the larger LEH group is running its issues with bankruptcy, there are client issues… but we’re comfortable with where LEH is going.” Mentions “70%” as a client retention figure across the LEH businesses BARC has nabbed.
—– At this juncture just wanted to note the EXTREMELY IRRITATING mobile phone static/bleeping from Barc’s end —–
Ian Smiley, RBS In spirit of what FSA and BoE has tried to do, calculating the losses from banks over the next few years on a peak-trough cycle basis, can you give us a number?
Cant be specific, but “we’ll be general”.
Hahahahahahahahahaha.
The current capital raising effort “gives a flavour” [!!!!!!!] of what kind of risks there are ahead…. capital has been raised in line with the stressed testing measures the FSA has outlined.
Ian: Can you tell us what the FSA’s stressed tier 1 equity ratio is, so we can calculate stress-case capital needs ourselves?
Chris: No can’t tell – FSA has asked us not to.
Ian: Can you comment on deposit flow performance?
Bob: “We’re categorically not paying higher rates in any currency, we’re seeing higher flows of deposits.”
Ian: “I was looking at the Libor rate, which shows you are paying 30bps higher than a bank like HSBC at the other end of the spectrum”
Manus Costello, ML: Current RWA situation, Deutsche note yesterday indicated £50bn hit on balance sheet under new Basel.
A: Numbers you hear at the moment are relatively uninformed guesses. Dont know how the DB number was put together, but there’s a lot of debate at the moment about what the Basel II changes will be.
Manus Costello: Any reclassification of assets for accounting (a la DB yesterday)?
Chris No, none at all.
Manus Costello: Can you give us more info on equity derivatives?
Varley: Dont normally go into this level of disclosure, but I will ask Richard to give you a bit of detail…
Ricci (Rich): Trading is choppy, very difficult month, but we’re doing ok. Nothing in particular in there to worry me at the moment.
Next question (didnt catch where or who it was from, apols) Can we X out the LEH brothers gain in the future and also X-out those fair value gains on your BARC debt writedowns (FAS 157 magic)… in the future what are next results going to look like without these.
Answer is respectfully fudged.
Analyst: “Oh well, I tried”
And we leave you with one final glorious statement (justifying decision of board to go it alone without HMT):
[Slight indignation] Indeed, during the last few months the level of board activity has been exceedingly higher than ever before!
Pats on the back all around chaps… no one could accuse you of being asleep at the wheel.
And that’s all folks. Back to that tooty little jazz riff.