Barclay's Looming Capital Call = LIMIT IFT'S

[Braveheart]

http://www.thebusiness.co.uk/news-and-analysis/630892/barclays-looming-capital-call.thtml

Dow Jones Newswire Thursday, 24th April 2008




LONDON (Dow Jones)--Barclays will have to raise fresh capital because its balance sheet isn't strong enough to withstand the multibillion-pound write-down it faces.
So having a well-diversified business and giving up on buying ABN Amro last year aren't protecting Barclays share price as the worries over the weakness of big banks' balance sheets haunt investors.
The stock is down 26% this year. Despite recent bullish comments by executives, the shares have underperformed European peers by 6% this month alone.
Investors, and the banking authorities, are rightly concerned about Barclay's capital strength. The bank ended 2007 with a Tier 1 capital ratio of 7.6%, as defined by the Basel II guidelines on capital adequacy, above the 4.1%regulatory minimum. But strip out preferred securities, and the core equity ratio falls to 5.1%.
Barclays knows it has to keep its cost of capital low to compete with other financiers of global growth but a strong balance sheet is vital too. That's ultimately why the Royal Bank of Scotland plans a GBP12-billion rights issue to shore up its core Tier 1 ratio to 6%.
If that's the magic ratio of equity to risk-weighted assets banks need to regain the market's confidence, Barclays has some catching up to do. It will likely have to take more write-downs adding up to GBP3.5 billion to GBP4 billion.
Barclays has exposure to Alt-A mortgage sector to the tune of GBP4.9 billion. RBS wrote down 50% of its Alt-A holding this week. No two portfolios are the same, but assuming the 50% is a ceiling, there's a write-down of up to GBP2.45 billion coming Barclays' way.
Barclays has a GBP5 billion in residual exposure to U.S. subprime mortgage securities of which it might easily have to write down 20% or GBP1 billion. The bank has exposure to commercial mortgages worth GBP12.4 billion as well as structured investment vehicles and leveraged finance assets.
The upshot is that Barclays is likely mulling a capital increase of GBP6 billion to GBP7 billion to get its core Tier 1 ratio up to 6%. The exact size will depend on gains it has from revaluing of its own debt.
The 50-day moving average of Barclays' shares is around GBP4.60. At 30% discount, that works out at a rights price of GBP3.22. The eventual theoretical ex-rights price comes to GBP4.25. So it's little surprise Barclays shares were last trading at GBP4.46.
Remember too that Barclays' earnings this year are sure to be under pressure from the credit crisis and sluggish U.K. economy. Last year over 50% of its pretax profit came from Barclays Capital and U.K. retail banking.
That said, if Barclays can bolster its capital base quickly, it will be among the better placed banks to benefit from an industry turnaround. Barclays has powerful Asian investors which came on board last year as well as a growing franchise in Africa.
(Arindam Nag, a Senior Writer for Dow Jones Newswires, has covered business and finance for 16 years in Asia, Europe and the United States. He can be reached at +44 207-842-9289 or by email: arindam.nag@dowjones.com)
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(END) Dow Jones Newswires
April 24, 2008 01:45 ET (05:45 GMT)

 

[Braveheart]

Folks No Spin This Is Why The Frtib Put A Limit On Our Trades To Save Barclay's Money. Do You Feel Safe Have Your Money Invested With The Frtib Now ? When Someone Tells You All Is Great And You Money Is Safe Don't Turn Your Back Your About To Get Robbed. I Wonder Did The Employees At Enron Get The Same Speech. Barclays As Stated Above Has Powerful Asian Investors That Came Aboard Last Year. Ironic The I Fund Was In Question By Mr. Long As Costing The Frtib Money. Remeber This Post Because I Asked Congress And The Senate To Look Into The Barclay's Connection With The Frtib And Apparently No One Cared - Stand Up And Continue This Fight.

 

[Braveheart]

I've said this since last November. Barclays is AMBAC and Bear Stearns redux. Barclay's liquidity is at the root of the TSP problem. I hope we aren't left holding the bag. Posted this other article earlier this week:
http://www.tsptalk.com/mb/showpost.php?p=161475&postcount=38

AMBAC, Bear Stearns redux?:cheesy:

Just how safe is that "locked room" Barclay's has our TSP funds in?

Quote:
ABN loser Barclays proves a winner... for now
Last update: 4:47 a.m. EDT April 22, 2008
(MarketWatch) -- If ever there was victory in defeat, John Varley and Bob Diamond at Barclays must have allowed themselves a smile or two in recent days.
In the saga that was the ABN Amro takeover battle, the consortium led by the Royal Bank of Scotland outlasted Barclays in securing the Dutch bank. On Tuesday, with RBS needing nearly $24 billion (12 billion pounds) to repair the big hole in their balance sheet, the 16 billion euros ($25 billion) that RBS forked out for its slice of ABN wasn't looking like money well spent. Even the RBS chairman, Tom McKillop, acknowledged on Tuesday that the deal came at "a very high price." See related story.

That said, Barclays isn't in the clear by any stretch. No less of an authority than Mervyn King, Bank of England's governor, expects more banks to raise capital. Analysts at J.P. Morgan on Monday calculated Barclays has a capital shortfall of 8 billion pounds.

Plus, RBS has the advantage of being the first U.K. bank to tap its shareholder base for new funding -- and most of the big U.K. banks have the same top shareholders, like Legal & General, Standard Life, M&G, and, through its index fund arm, Barclays itself. Obviously, the latter is going to participate in any Barclays rights offer, and probably so will the other big fund managers. The question at this point is at what price -- and by price, that's not just the 46% discount that RBS is offering on the rights issue. In the Edinburgh example, three new independent directors will be heading to the board. RBS CEO Fred Goodwin was under comparatively (and deservedly) more fire than his rivals at Barclays, so it's doubtful that institutional investors will demand as heavy a say at the London-based bank than they now want at RBS. But that's assuming Barclays doesn't have any particularly nasty write-downs that it has yet to disclose. Diamond, the investment banking chief and the bank's president, in particular has long been insistent there are no particularly damaging surprises around the corner, despite Barclays Capital's deep tentacles into the world of mortgage-backed securities. And Barclays also has big exposure to the debt-engulfed U.K. consumer.
Varley and Diamond must navigate carefully to ensure one big victory isn't followed by an even worse defeat.


Yes you are 100% correct. I must have missed your post. There is a direct connection between the FRTIB with the IFT Limit and Barclay's. If anything guilt by association. All of our funds should be removed immediately from this London Based Bank. They are calling the shots with our money what the hell is wrong with Congress and the Senate and the FRTIB to allow this to happen and then claim the rule change was to protect us. PROTECT US AND END ALL RELATIONS WITH BARCLAY'S START THERE.

 

[Braveheart]

Closing Open Seasons - WHAT HAS CHANGED TO SUDDENLY CHANGE THE LAW SIGNED AND APPROVED BY CONGRESS & THE SENATE ??? THIS NEW RULE CHANGE SHOULD HAVE TO PASS THE HOUSE & THE SENATE SAME AS 2004 IF NOT WHY ???????????????????????????????

http://www.govexec.com/story_page.cfm?filepath=/dailyfed/0504/052004pb.htm

By David McGlinchey dmcglinchey@govexec.com May 20, 2004
Following a public appeal from the Federal Retirement Thrift Investment Board, the House Government Reform Subcommittee on Civil Service and Agency Organization voted to eliminate open seasons in the Thrift Savings Plan.
"Today's bill contains a sensible change to the Thrift Savings Plan rules to eliminate open seasons," subcommittee Chairwoman Jo Ann Davis, R-Va., said Tuesday. "I am a firm believer that federal employees should be permitted to manage their own money. This provision allows employees to make changes in the TSP allotments throughout the year instead of just two specified open seasons."
The subcommittee approved the elimination as part of an amendment to The Federal Workforce Flexibility Act, which is designed to improve the government's ability to recruit and retain top-performing employees. The Senate already has passed the legislation but did not include any language to end the open seasons. The open season language must clear the full House and the House-Senate conference before it is signed into law.
If the measure is ultimately approved, TSP participants would be able to adjust their contribution throughout the year, and new employees would be allowed to join the 401(k)-style savings plan and begin receiving matching contributions from their agencies shortly after joining the federal workforce.
Now, plan members must wait until an open season to make these moves. The TSP holds two open seasons annually. The current one began on April 15 and is scheduled to run through June 30. The second one will be from Oct. 15 through Dec. 31.
In March, Thrift Board officials said the open season is an anachronism that was put in place at the plan's inception to provide "structure" and limit the administrative burden on the fledgling agency.
"They are no longer useful in a daily-valued plan environment," Thrift Board Chairman Andrew Saul said. "Indeed, they restrict the opportunity for employees to make contribution elections."
Outside experts agreed with Saul and TSP Executive Director Gary Amelio.
"Open seasons made sense when the FRTIB was a new agency just getting started, and lacked the administrative capability to quickly enroll participants and to implement investment elections on a real-time basis," said James Sauber, chairman of the Employee Thrift Advisory Council.
Davis said the personnel legislation will "in general make the federal government an employer of choice."
"My hope," she added, "is to see this bill move quickly through the House on its way to final passage."