Barclay’s PLC > $15.0 B

June 30, 2008 – 6:02 pm

2008-06-30 They Eat Cake:

Barclay’s is having its name bantered about as a possible buyer for the distressed Lehman Brothers. But Barclay’s is still struggling under the vast weight of indulgences racked up during subprime better times and finds itself unmercifully pursued by a wealthy sovereign state. In the aftermath of the gutting of Bear Stearns, any buyout begs the question of who rescues who? <>

2008-06-16 They Eat Cake:

Barclays, the last of the big British banks to raise capital, is close to getting its £4B placing with some of the world’s biggest sovereign wealth funds.

2008-06-04 Footsteps:

As the credit crisis catches up Barclay’s will have to pick up its pace to stay ahead. So goes the word on the street anyway.

Barclays, the U.K.’s fourth-largest bank, may need to raise about 6 billion pounds ($11.7 billion) to increase its capital ratio as profit falls on slower securities revenue and rising customer defaults, Citigroup Inc. analysts said last month. Barclays said May 15 it has a number of options and hasn’t ruled out a rights offer.

It also appears that Barclays is running from the law; Britain’s equivalent of the SEC, the Office of Fair Trading (OFT), raided the bank 13 days ago.

Barclays Plc and Royal Bank of Scotland Group Plc were raided by the U.K. antitrust regulator as part of an investigation into the price of loans to accountants, lawyers and other professional services firms.

The two banks were visited 12 days ago, Corinne Gladstone, a spokeswoman from the Office of Fair Trading said in an interview today. London-based Barclays said it approached the OFT with information about “inappropriate” contacts with one department in exchange for leniency on March 17.

Maybe we can start a count of the number of years in prison sentences for bank officials.

2008-05-22 Write-Downs Count of a Different Sort:

We have been keeping a running tally of write-downs and other credit-related distress taken by the major banks since 2007. But here comes a write-down count of a different sort, how much in write-downs and credit losses firms have written off per wholesale banking employee.

Barclays Bank/Barclays Capital - $7.7B, 16,200 employees, $475,309 per employee

2008-05-15 Credit Crunch Closer in Q1:

Barclay’s reported more than earnings today; the bank, which has to date so expertly concealed its insolvency, essentially admitted that the gig’s over. After holding the write-downs at bay in accounting terms, the bank confessed to a sum equal to all of fiscal 2007 credit crunch-related write-downs in the first quarter of 2008 alone. They reported $3.3 billion of $3.3 billion) in write-downs on mortgage and other investments, while refusing to raise capital for now. We can find no mention of level 3 assets. For the loan loss provisions the company added 170 million- pound to provisions to cover “selected liquidity products”.

The updated tally for Barclays follows.

1. Write-Downs: $6.1 B + $3.3 B = $9.4 B
   
2. Capital Raised: $0.0
3. Loan Loss Provisions: $5.53 B +$170 M= $5.67 B
   
4. $??

There is no mention of Level 3 assets, so we set them to zero for now and calculate a lower bound for Barclay’s Misery Index >$15.07 B

Profit at Barclays Global Investors, the asset-management unit run by Diamond,

2008-04-13 Sinking:

Subprime loans are sinking at an accelerating pace, taking down everything connected to them, including Barclays, who issued the warning yesterday. Barclays reports again in May, so we have to wait until then to get a fix on new write-downs, although a rights issue or other capital-raising effort could come overnight.

2008-04-13 Losing Ground:

Barclay’s has yet to see significant subprime-related write-downs rear their ugly heads. The bank has stayed a little more out of the limelight since JPMorgan Chase & Co bested them for top underwriter of Fannie Mae and Freddie Mac “agency” debt.

2008-02-24:

Barclays reported a 2007 pretax profit of £7.08B ($13.9B), down from £7.14B ($14.0B) in 2006, but just above an average forecast of £7.05B ($13.9B). Though the bank remained profitable, it took write-downs of £3.1B ($6.1B), nearly three times the £1.3B ($2.6B) it guided for just one month earlier. The write-downs were related to assets such as collateralized debt obligations and loans for leveraged buyouts. The bank also says its credit market exposures resulted in total losses of £1.6B.

Barclays also revealed it had set aside £2.8 billion ($5.53 B) in bad debt charges and impairment provisions, a rise of 30 percent on the year before. The increase was largely down to a £782 million hit from exposure to the US high risk home loan defaults and the credit turmoil, the group said.

On pages 60-61 of its fiscal 2007 annual report, Barclays listed its remaining exposure to the credit markets as of 2007-12-31 as follows:

• ABS CDO Super Senior (net of hedges) = £4.7 B ($9.3B)
• Whole Loans (£3.2 B) + Direct and Indirect exposures (£1.8B) = Other US subprime exposures (£5.0B)=($9.9B).
• Alt- A = £4.9B ($9.7B)
• Mono-lines = £1.4B ($18.1B)
• CMBS = £12.4B ($9.3B)
• SIV-light liquidity facilities = £152M ($0.3B)
• SIVs = £ 590M ($1.2)
• Leverage Loans (net of fees & impairments) = £7.B ($14.6B)

For its part, Barclays says things are under control.

The bank said it is confident it knows where its risks are and is comfortable with the current levels of writedowns,

I am just as confident the risks during the post housing bubble recession are sky high and that the above list of exposures WILL be written entirely down, penny by brutal penny. But there is no need to argue, time will tell us all. We begin the tally for Barclays.

1. $6.1 B
2. $0.0
3. $5.53 B
4. $??

There is no mention of Level 3 assets, so we set them to zero for now and calculate a lower bound for Barclay’s Misery Index >$11.6 B

2008-02-15:

Baryclays reports full year 2007 results on Feburary 19. In November, the bank guided gently saying

it should deliver a 2007 pretax profit of 7.1 billion pounds ($14.7 billion), up from underlying profit of 6.8 billion in 2006.

With respect to subprime related write-downs, the bank estimated that it would write down net £1.3B ($2.6B) on its estimated exposures at end-October. As of that date about

“Half of the writedowns in Barclays Capital were treated as impairments rather than negative trading revenue,” said Derek Chambers, a London-based analyst at Standard & Poor’s Equity Research in London who has a “buy” rating on the stock. “It is perhaps part of the reason why Barclays has got off more lightly than some of its peers.”

By Feb. 6, that write-down estimate remained intact, but apparently it did not include the $1.6B it had to pour into one of its leaky SIVs.

There is the notion that

“It is safe to assume…that both Barclays PLC (BCS) and Royal Bank of Scotland Group PLC (RBS) do hold significant hedges across their portfolios and their gross exposure to ABS CDO will be somewhat larger than the net exposures in November and December.’

But is it safe to assume that the hedges are safe? If the safety net involves mono-liners, then head for the hills. It seems like a long time until Feb. 19, but we will be watching to see how Britain’s third-biggest bank shakes out.

Posted in writedowns and distress |