Barclays Underwater
April 30, 2008 – 10:10 amBarclays Capital announced that about half of recent subprime and Alt-A borrowers will likely owe more on their mortgages than their houses are worth very soon. The effect will be to put $800 billion of debt at greater risk of default.
The odds that a borrower will default, saddling lenders and bond investors with losses, rises when a homeowner owes more on a property than it can sell for, they wrote.
“Mortgage loans are moving underwater at a very sharp pace, far more than suggested by aggregate home price data,” they wrote. Home mortgages held by households totaled $10.5 trillion on Dec. 31, according to Federal Reserve data.
The mortgages might be under water but you can bet it’s Barclays PLC that’s sinking under the weight. What will Britain’s third largest bank by market capitalization, do with all that “saddled debt”?
Analysts have speculated that Barclays was a likely candidate to follow the lead of Royal Bank of Scotland Group in seeking additional capital through a rights issue. RBS, which outbid Barclays to take over the Dutch bank ABN Amro, said on Tuesday that it hoped to raise 12 billion pounds (US$23.9 billion; ?15.1 billion) from its shareholders.
If the rights issue does not come about or if it is not sufficient then, maybe more extreme measures will be considered, but we hope it doesn’t come to this.
U.K. bank Barclays PLC is providing “personal banking services” for up to four members of Robert Mugabe’s regime who have benefited from controversial land-grabs from white farmers in Zimbabwe, a U.K. lawmaker said Tuesday, The Daily Telegraph reports Wednesday.
Under European Union sanctions imposed in 2002, bank accounts and funds of 131 members of Mugabe’s government remain frozen.
Shocking I am sure.
One Response to “Barclays Underwater”
Read that financial leverage at Balclays PLC and Royal Bank of Scotland was 50 ! Allo massive dilutions.
By Marc Authier on May 12, 2008