Lehman’s remains may help Barclays avoid nationalization
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Lehman Bros.’ collapse in September helped trigger the global financial crisis. But in a bit of irony, the brokerage’s demise now may save British taxpayers a pile of money.
British banking giant Barclays said today that the Lehman assets it bought last year are one reason why it’s confident it won’t need government help to survive.
From Bloomberg News:
Barclays PLC, the U.K. bank that declined taking money from the government, wrote down about 8 billion pounds ($11 billion) of credit assets in 2008 and said rising revenue precludes the need to raise more capital. Barclays jumped as much as 31% in London trading after saying its investment bank and the Lehman Bros. Holdings North American assets acquired last year are driving profit, and “record revenue” will cover writedowns. The bank exceeds regulators’ capital requirement by 17 billion pounds, it said in a statement. “These figures demonstrate that although we have been heavily impacted by the credit crunch, our income generation was at a record level in 2008 and has enabled us to withstand this impact and still produce strong profits,” Chairman Marcus Agiusand Chief Executive Officer John Varley said in an open letter. The statement is Barclays’ latest attempt to calm investor concerns after its shares fell 66% this month. Barclays plans to release earnings on Feb. 9, ahead of the originally scheduled Feb. 17, and reiterated that 2008 pretax profit will exceed 5.3 billion pounds.
In what many people on Wall Street regarded as a shrewd move, Barclays bought Lehman’s North American investment banking operations as well the firm’s fixed-income and equity sales, trading and research units. The deal, which cost Barclays less than $2 billion, was struck after the brokerage filed for bankruptcy protection.
Barclays has another reason for wanting to avoid taking government capital: It would cause the bank problems with its Middle Eastern shareholders. Bloomberg notes that Abu Dhabi’s royal family and two Qatari investors bought a 32% stake in October after Barclays said it wouldn’t seek help from the British government.
‘Barclays’ agreements stipulate it must offer additional shares at the discounted price to the Middle East group before accepting any money from the U.K.,’ Bloomberg said.
-- Tom Petruno