Expansion into International Markets: British banking giant Barclays (BCS) is probably thankful that they lost the bid for ABN Amro to Royal Bank of Scotland last year. In a wise move, the company waited until after Lehman's bankruptcy to pick up Lehman's investment banking division for just $250 million. The company also picked up Lehman's NY headquarters and other assets for $1.5 billion. When the ashes finally settle, banks like Barclays and Bank of America that are picking up distressed assets (and risk) are likely to emerge much stronger.
Starving for capital and hell-bent on retaining its handsome dividend, Barclays PLC (ADR: BCS) plans to raise $8.9 billion (4.5 billion pounds) by selling shares to investment banks and sovereign wealth funds around the world.
As much as 1.58 million shares will be sold to existing investors China Investment Bank and Singapore’s Temasek Holdings Pte. Ltd., as well as new investors Japan’s Sumitomo Mitsui Banking Corp., Qatar Investment Authority and Challenger - a fund that represents "the beneficial interests" of Qatar’s royal family. The investment, which will be made through the group’s Sumitomo Mitsui Banking Corp. unit, underscores an evolving trend among large Japanese banks that have so far been unaffected by the subprime collapse.
Barclays, Britian’s fourth-largest bank, said the proceeds will help lift the bank’s Tier 1 capital ratio above its 5.25% target, preserve capital for its dividend and help the bank’s veiled acquisition plans, or "opportunities for new business," as Chief Executive Officer John Varley put it in a statement. And though Varley didn’t say it, the capital is needed to catch up with rivals including Royal Bank of Scotland Group PLC (ADR: RBS) and also give a layer of armor to protect itself from the credit plague circulating throughout European banks.
Continuing Buy Back Programme: Barclays continues to purchase it's own shares to ensure existing shareholders are not diluted by July's £2.4bn share issue to China Development Bank and Temasek, indicating liquidity remains strong despite the current squeeze in credit markets.
Reuters reported that Barclays PLC won the dismissal of a lawsuit brought by U.S. investors seeking to recover losses from the British bank's alleged failure to disclose and properly account for its real estate exposure.
Win the case dismissed, BCS faces less litigation risk concerning its real estate investments, which should help the stock's performance.
Decreasing Costs in Strongest Segments: Barclays has managed to increase profits before taxes and cut operational costs year on year in both of its highest profit contributing segments: Barclays Capital and UK Business Banking.