Barclays: Rumors of Rights Issue Untrue
Barclays Bank has ridiculed suggestions that it is planning an imminent rights issue, as it attempts to draw a clear line between its own position and that of Royal Bank of Scotland.
Marcus Agius, the chairman, and John Varley, the chief executive, told Barclays' shareholders at the annual general meeting yesterday that the bank was under no immediate pressure to boost its capital and had a range of options if it chose to do so. Speculation about Barclays going to shareholders for funds had mounted after RBS announced its £12bn cash call on Tuesday. The first question at the AGM in London was: "Will there be a rights issue, either now or in the foreseeable future?"
Mr Agius replied that Barclays wanted to increase its equity tier one ratio. But he had harsh words for those who assumed Barclays had the same problems as its rivals. "When things are at their most difficult, the market tends to treat all people pretty much the same... Of course, that is rubbish. Some banks have better business portfolios than others and some banks perform better than others," said the chairman.
He added that the natural way to boost capital would be through retained earnings and that this was possible because Barclays was profitable in the first quarter. Barclays can also manage its balance sheet by changing the mix of its lending, or raising fresh equity, Mr Agius said.
But he hinted that Barclays would be more likely to seek funds from sovereign wealth funds than its shareholders. The bank raised about £2.5bn last year by selling stakes to Temasek of Singapore and China Development Bank. "Because of our relative strength, we have options and we will look at those," he said.
Mr Varley said market conditions had been tough in March but that Barclays had made a profit. All its businesses, including the Barclays Capital investment bank, were profitable in the first quarter, though profits at BarCap and the BGI funds business were well down on a year ago.
Mr Varley hit back at critics who have accused banks of recklessness. "It would be bad for the world if we were to conclude that banks should stop taking risk ... It's very important that risk management doesn't become risk aversion. It's also clear that strong economies need strong banks."
Mike Trippitt, an analyst at Oriel Securities, said: "Given the news from RBS this week and Credit Suisse, Barclays had a perfect opportunity today to talk down expectations. In actual fact, the statement was pretty robust and quietly confident."
Barclays lost a bitter bidding war with RBS's consortium last year to buy ABN Amro, which caused a third of RBS's new write-downs. Mr Varley said Barclays was right not to overpay for ABN.
Asked how different Barclays' position was from that of RBS, Bob Diamond, the head of BarCap, said: "There is enough information there to show the differences. Clearly it is a different situation."
Mr Diamond said market conditions would be challenging this year but that BarCap would outperform the sector. Despite fears of massive City job cuts, he said his London staff count would be about the same or maybe higher by the end of the year.
Exane BNP analysts said: "We expect BarCap to take almost £2bn writedowns in 2008, with a substantial part in March. So either the writedowns were a lot smaller than we forecast or Bob has found some more hedges to offset them."
Barclays shares closed down 0.1 per cent at 455.25p.