Barclays' £300m gift
Barclays has sold the £500m of Reserve Capital Instruments that it clawed back from the royals and state investment funds of Abu Dhabi and Qatar.
Bored with what you've read so far?
Well it may be worth reading on, because in a way it's shocking that Barclays found buyers for this stuff - because it raises questions about why the bank gave away around £300m in commissions and warrants to Gulf investors who aren't exactly short of a bob or two.
Here's what you need to know.
When Barclays only 19 days ago sold £3bn of these Reserve Capital Instruments (RCIs) to Qatar and Abu Dhabi, it threw in warrants to purchase 1.5bn new Barclays shares at any time in the next five years at a price of 197.775p each.
According to Sandy Chen of Panmure Gordon, each of these warrants is worth around 16p, which would value the lot at just under £250m (and, by the way, some analysts have argued that the warrants are worth a good deal more than this).
They were apparently an important sweetener to persuade Qatar and Abu Dhabi to buy the RCIs. What's more, Qatar and Abu Dhabi were also paid a £60m commission in cash for taking the RCIs.
In other words, Qatar and Abu Dhabi were paid a bit more than £300m for buying £3bn of securities - and these securities pay a stonking 14% rate of interest until June 2019 (many of us would love a bank to pay us that kind of interest).
Here's the thing.
Other investors yesterday bought £500m of the RCIs without the inducement of the warrants or the cash commission.
Perhaps unsurprisingly, although Qatar and Abu Dhabi were prepared to release £500m of the warrants for sale to other investors - following complaints from British investors that they should have been offered these in the first place - the Gulf investors didn't give back any of the commission or warrants.
Qatar and Abu Dhabi therefore ended up being paid over £300m for taking even less risk on their investment in Barclays.
It's worked out very nicely for them indeed. Now there's a proven appetite for these RCIs, they could presumably sell the rest on the open market, should that be appealing to them. In which case, the £300m would become pure profit attached to zero investment risk.
So why on earth did Barclays less than three weeks ago feel it had to pay so much money to Qatar and Abu Dhabi, to persuade them to buy these securities?
Well, it points out that market conditions were fraught at the time.
But there was no urgent rush to raise the money. As Barclays told me back then, the Financial Services Authority had given it till early next year to raise the capital it needed.
Arguably therefore Barclays has needlessly given away £300m.
And don't think this is about losses suffered by funny, remote people in the City with no connection to you.
It represents an erosion of wealth for millions of us saving for a pension, since most of our pension funds and life companies have an interest in Barclays.
You should be concerned.
Could the board make amends? Well Barclays' four executive directors have volunteered to forego their bonuses.
But they would probably have to do without bonuses for around 10 years to compensate for the shareholder wealth given away in this transaction.
Which means that the decision by the board to offer itself up for re-election may turn out to be more than a symbolic gesture.
In particular, there is likely to be pressure on the chairman, Marcus Agius, to explain why he and the non-executives permitted the deal with Qatar and Abu Dhabi to be transacted on such generous terms.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~14~RS~)
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Well Robert it looks like they really ought to resign then. There's nothing they can say or do to make the situation look good. They've messed up badly and should pay the price for failure.
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Another inciteful post Robert. perhaps most of all it shows the sheer panic that is present amongst the board members at banks.
Their current need for lqiuidity is so great that they would offer almost any deal to get cash now. They thought the cash raising in public would take too long and hammer the share price and the Government would interefe with their tax scheming business.
Wrong bet, share price hammered anyway and a terrible deal agreed. At least they can carry on with their tax schemes and try to make some money back...
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Another inciteful post Robert. perhaps most of all it shows the sheer panic that is present amongst the board members at banks.
Their current need for lqiuidity is so great that they would offer almost any deal to get cash now. They thought the cash raising in public would take too long and hammer the share price and the Government woudl interefe with their tax scheming business
Wrong bet, share price hammered anyway and a terrible deal agreed. At least they can carry on with their tax schemes and try to make some money back...
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Another inciteful post Robert. perhaps most of all it shows the sheer panic that is present amongst the board members at banks.
Their current need for liqiuidity is so great that they would offer almost any deal to get cash now. They thought the cash raising in public would take too long and hammer the share price and the Government woudl interefe with their tax scheming business
Wrong bet, share price hammered anyway and a terrible deal agreed. At least they can carry on with their tax schemes and try to make some money back...
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This is surely just a huge error in judgement by Barclay's exec, once again demonstrating how bankers aren't the smartest guys in the room!
That or greed clouded their judgement and fears for their personal bonuses being controlled by government caused them to give a way as much corporate (not their own) money away to ensure their personal wealth!
This may have backfired when they're all not returned in the vore, but I'm sure the severance payments will be (over) generous!
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Sack them all!
They cut their own nose to spite their face, and now it's coming back to haunt them.
Yet another testament that greedy bankers will never never never learn, and will keep repeating their mistakes in centuries to come.
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Wow, you've really got it in for Barclays - did they refuse to give you a job in the past?
I'm no expert, but my understanding is that at the time, Barclays couldn't find anyone willing to invest the large sums of money that was necessary. You point out that the FSA didn't require them to raise this money until next year, but given how crazy the markets were at the time, it's doubtful Barclays' share price would have survived long enough for them to find this money by next year.
It's all very well saying they could have raised this money elsewhere, but the ONLY alternative was the Treasury. There were no other investors willing to risk potentially throwing good money after bad.
I'm no Barclays fan in terms of being a customer of theirs, but I respect them for the decision they've made in this case. Yes, Qatar and Abu Dhabi have gotten a good deal but fair play to them - they've been willing to put their money on the line.
I can't help feeling that there's a bit of protectionism here. If it was Standard Life and Norwich Union who had taken up these RCIs and warrants at the expense of all the other shareholders in Barclays, would you have been kicking up such a fuss?
You (and by extension Alistair Darling) are increasingly looking like spoilt children who haven't gotten their own way. Considering all the business news you could blog on, there's been a disproportionate amount written:
a) complaining about Barclays and the deal they've given to Qatar and Abu Dhabi, and
b) Trying to convince Lloyds shareholders that they MUST vote to take on Halifax
c) Trying to convince everyone that there's no possible alternative for the Halifax than Lloyds taking them over, despite other potentially viable alternatives.
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Fantastic and we wondered, with experts running them, how banks got into problems in the first place.
Just goes to show they have less of a clue than the average person in the street.
Trouble is, if they get kicked out, they will pop up as advisers to the government as Gord likes to be all inclusive.
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I'm not sure why Robert Peston is surprised about Barclays actions. I few weeks ago I raised some serious very similar questions about Barclays in a comment on this blog.
The moderator refused to post those qustions. The moderator refused to give me an explanation as to why my comments were not being posted.
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Gripping reading but I really just don't know why you're reporting this particular story, RP unless you mistakenly think everyone is fascinated by it.
I say this because the banking system has almost become an irrelevance except to say that those with the worst balance sheets are pursuing a kind of desparate 'ethnic cleansing' by dispossessing people and firms in a ruthless stop-at-nothing attempt to recapitalise. The banking story is so over, there a much, much bigger issues now.
Why an irrelevance? Because banking is - historically - there to facilitate trade.
Trade means firms getting access to funding without a lot of huffing and puffing and everything I hear and read tells me everyone who needs it - can't get it! Even after so much said by Govt, it's not happening is it? If anything firms are more worried about being dispossessed than anything else.
So, it being a primary function (savings, deposits and cheque clearing being secondary functions) then there doesn't seem much point to having a private sector banking system at all, does there? And thus in this context Barclays is an irrelevance.
Shareholders? Well, sorry but like everyone else in business you seem to be stuck with a business (a banking business) that has gotten itself into difficulties. What can I say? Welcome to the club.
The scale of the dispoessession - largely unnoticed thanks to pretty dismal reporting standards - dwarfs the scale of the Highland clearances - that went down in infamy. It should be a red-hot subject for the media, because the media seem to be the only pressure group capable of getting this government to do anything!
We've had weeks and weeks of bank stories RP - time to do some other stuff, really, unless you write this interminable banking stuff to benefit personally in some way.
I assume you are working what happens in the run up to and after the entire collapse of the W World's manufacturing when the 3 biggest US carmakers don't get their 20Bn?
That, frankly, will knock the 'failed bank' story into a cocked hat and definitely put a grass-roots perspective on things - even if you can't.
I think Brown made a terrible mistake putting money in Northern Rock, because he set such an overt and one-sided precedent. I honestly think he thought that would be the end of it and of course now we can see it's just the start. He had a famous chance to nationalise the bank and run it properly and ethically but instead he thought it could run the 'same old way' with a bit of govt money and as we can now see they are top of the dispossession league. An absolute disgrace.
And worse is yet to come. I heard Geoffrey Robinson on Today (aka Toady) this morning, literally saying, in respect of financial support for UK car manufacturers, that they were all subsidiaries of US firms and thus should look to the USA for support. He used words like 'we can't go around propping up failing firms' when the Govt has just done that with some banks. Banks are businesses too! What tis the difference? And the notion that the Govt shouldn't offer loan packages to car firms in the UK flies in the face of every argument for inward investment. Apart form the immediate danger to UK mfr of this narrow-minded and stupid attitude, what signal will it send to any 'inward investor' of the future?
GC
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Products become more attractive when you know someone else also wants to buy. It confirms/reinforces the wisdom of your own decision.
For example, if Buffet buys into Goldman Sachs, others who were wavering will suddenly want some of the action too.
Hence the knowledge that the soveriegn wealth funds of Qatar and Abu Dhabi wanted to buy this stuff (albeit with sweeteners) will have changed its attractiveness to others.
I doubt that this phenomenon can be called upon to fully explain why these instruments should be regarded as having changed from "poisonous" to "highly placable" in less than a month.
But as I see it, it's the best line of defense for the managers at Barclays, who suddenly seem to have lined themselves up like ducks at a fairground shooting stall.
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Remember the British Aerospace FUG,once again no surprise when you look at the players.
Time to EXIT Barclays. .
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I'm all for a bit of symbolism! At least it shows some sense of contrition!
Would that the other architects of our doom showed some of the same....
Symbolism and contrition will at least satisfy the rising tide of bloodlust in the financial markets
UK plc is in no fit state to help itself-we have no option but to look elsewhere. GB probably already has the begging bowl out doing the rounds!
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Glad you're watching this Robert. Good job !
Us ordinary punters are most unlikely to spot these goings on.
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On Radio 5 Live this morning there was a piece on prostitution, and in particular the illegal offence of "living from immoral earnings".
I couldn't help but think of bankers in every sense!!
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Begining to appreciate Alexander Curzon's frustration with BBC "management" of blog responses. I see my comment at #6 has been referred, presumably because I suggested RP had ulterior motives for continually banging on about Barclays. It's interesting how BBC employees can make critical statements of others, but responses in similar vein get blocked. Unlike AC, I've only had two comments blocked, both making specific criticisms of RP.
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IF£300 million warrants value and commision is taken into account that ,would produce aproaching %16[real] interest
Which means they get back their piece of ponzi pie in the sky in six years, should Barclays still be arround .
Does the 17% tell us about expected likely inflation rates after the temporary pre tsunami drop in liquidity levels [deflation ]that we are now experiencing ?
Water wings and rubber dingies might be a good hedge for our antedeluvian oconomy
or am i being hopelessly optimistic ?
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Robert such actions reeek of incompetence and not realising that teh notion of being a master of the universe went out over a year ago.
Unfortunately Barclays executives have shown they are not working in the right time zone.
There is a serious issue of competence and involved and double standards that are nothing short of outrageous.
Only in the UK do we stilll assume that things will get done on a nod and a wink.
Barclays management can't get real because it is in the culture to do things the Barclays way, however wrong it is.
When I read in the Telegraph headlines yesterday,"Back us or sack us" the answer is a straight no brainer. As Alan Sugar woud say: "You're fired and there is no compensation for loss of office or any perks that will go with you!"
Please don't think that they can't be replaced because the simple answer is they can forem a pool of 1000's who would accept a level of remuneration at 50% of what is being paid now and do a damn site better job.
I for one would offer my services and show all shareholers what it takes to get things right there because Barclays has lost the plot and is presently in panic mode which serves no one any purpose.
If any institutional or private shareholders want to get in touch I am ready to go in and sort things out.
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Dear me, no wonder the shareholders are complaining. I would think that they should all be resigning. In the USA they might be worried about the legality of their actions
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Just confirms my view that the global financial system remains a complete mess, with bankers and politicians thrashing about trying to fix it. I simply don't believe some of the soothing noises coming from various quarters, not least politicians, that would have us believe we're solving this problem.
Just think. If the bankers are making errors on this scale, imagine the sort of cock-ups now being engineered by our glorious political leaders - and being sold to us as considered economic policy decisions for the good of all mankind. My foot!
Let's see what happens with the auto industry next shall we? And which other industries are waiting in the wings to make their case for a taxpayer bail out?
This is madness.
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My Immediate question for Robert to research arises from noticing how widely significant equity in our largest corporations, and not a little control, lies offshore.
What percentage of the equity of Barclays Group entities do Middle East investors own, both directly and indirectly?
Put bluntly, is there even a hint that the board decision may have been influenced by the interests of a powerful group of share holders who just happened to be also offerring to buy the RCI's?
Maybe it is the price for a positive vote in favour of the incumbent board members? Or a few islands in the Dubai Globe Resort a few years hence?
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I think the problem is that Barclays went straight from offering a standard deal to shareholders, ie buy a share and get a dividend if we make a profit (not a certainty at the moment) for which there may not have been a great deal of enthusiasm, to offering some non shareholders a blockbuster deal, ie a guaranteed 14% + a warrant on share options.
I think that Barclays shareholders should be aggrieved that they were not offered the deal first and the scraps then offered to non shareholders.
It appears that a lot of directors seem to think that it is their company for whom the shareholders are an irritant for whom the minimum concessions must be made.
It doesn't seem like the board were acting in the interests of the current shareholders who lets face it are the owners.
If I were a Barclays shareholder my opinion would be that the position of the board was untenable as they have not acted with my interests at the top of their agenda.
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We could do with a couple of these Saudi oil barons running the pension funds - they clearly know how to get maximum profit at minimum risk.
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Plenty of Censorship today it would be good to see what these people are saying?
So moderators who are you to JUDGE??
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# 8
Great post. I said something similar at #6 but it was blocked, I think because I suggested even worse ulterior motives to RP than you did. I didn't bother listing the nonsense in his blog above, as there's just so much. You've just done it for us all anyway! I'd just add one further point, though. RP (not for the first time) can't resist saying how he'd love to get 14% interest. What he fails to point out is that the ME investors are buying capital instruments that are by no means guaranteed against loss. We know that investors in this type of stuff have been toasted so far (Lehman's being the most obvious case), so there's a lot more risk for these guys than for mere mortals with a current account (ie backed by government guarantee). He also fails to make the connection that if, indeed, banks paid us all 14% on our deposit accounts, we'd all have to pay about 16% for our mortgages to make the economics work.
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This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
When you look a little deeper the figures look even more ridiculous than on the surface of this report.
Commissions paid were roughly 10% of the amount borrowed - so effectively Barclays borrowed £2.7bn having given back 10% of it immediately.
At 14% coupon for 10years they will give the investors £420mn every year for 10 years - or £4.2bn over 10 years.
On the £2.7bn which they actually got this 14% coupon is actually just over 15.5% apr.
After 10years assuming Barclays hasn't collapsed into government ownership in the mean time (or even assuming they have will HMG seriously want to annoy major oil supliers to this country by wiping this investment out?). They get their original £3bn back, presumably borrowed on the assumption that in 10years time raising that kind of capital will be easier.
Or for a 10 year loan of £2.7bn they get back £4.5bn.
Private eye have suggested that one reason is that this deal is offshored so the effective coupon is lower than the cost of borrowing from the BOE - if it was this straight forward surely the Barclays board could easily have defended the deal, curious they haven't if this report were correct.
You could of course be cynical about it and having noted that the option price multiplied by the number of warrants given
= £2.97bn. Startlingly close to the sum borrowed. So in principle the investors can at a time in the future when conditions have improved exercise their option - give Barclays £2.97bn - with presumably the boad seats such a substantial holding implies force the board to reimburse the RCIs (after all - presumably lending will be easier and at much lower rates at this time) so paying off high coupon debt and refinancing with lower coupon which makes perfect sense.
The investors then have a large stake in Barlcays which effectively has cost them nothing more than the risk on a short term loan. As a longer term strategic move where the objective is to gain substantial stake in Barclays this deal would look very attractive. If it was anything else would the warrants/option have been needed at all?
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Is it possible that now it has Abu Dhabi and Qatar propping it up that Barclays has become less risky and that without that prop no one would have put the money into them?
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To all Bloggers I urge you to contact the BBC re DELETION policy.
The POLICY??? NEEDS a RETHINK.
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This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
# 23
As of yesterday, the largest ordinary shareholders in Barclays were Qatar Holding LLC, with 6.25%. Other major shareholders were Lloyds TSB with 5.01%, Axa (4.34%), and L&G (3.98%). The Lloyds, Axa, and L and G holdings will be in their investmetn funds, ie held on behalf of pension funds, people's ISA etc. It's just a quirk of the disclosure rules that these have to be included in the institutions' reports where they have discretionary control over how their clients' money is invested. So the Qataris already do have a significant interest in Barclays as you suspected. On the flip side, though, I'd point out that under 60% of Barclays business is actually UK-based. Barclays is a global business with a global shareholder base.
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# 23
As of yesterday, the largest ordinary shareholders in Barclays were Qatar Holding LLC, with 6.25%. Other major shareholders were Lloyds TSB with 5.01%, Axa (4.34%), and L and G (3.98%). The Lloyds, Axa, and L&G holdings will be in their investment funds, ie held on behalf of pension funds, people's ISA etc. It's just a quirk of the disclosure rules that these have to be included in the institutions' reports where they have discretionary control over how their clients' money is invested. So the Qataris already do have a significant interest in Barclays as you suspected. On the flip side, though, I'd point out that under 60% of Barclays business is actually UK-based. Barclays is a global business with a global shareholder base.
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Robert,
They needed £7,000,000,000 pdq. Not just the £500,000,000 that, all of a sudden, their incumbent shareholders were prepared to provide. (When they found the guts, after the event).
Job well done in my book. Let's compare share prices of Barclays, RBS and Lloyds in a couple of years' time shall we?
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# 23
As of yesterday, the largest ordinary shareholders in Barclays were Qatar Holding LLC, with 6.25%. Other major shareholders were Lloyds TSB with 5.01%, Axa (4.34%), and L&G (3.98%). The Lloyds, Axa, and L and G holdings will be in their investment funds, ie held on behalf of pension funds, people's ISA etc. It's just a quirk of the disclosure rules that these have to be included in the institutions' reports where they have discretionary control over how their clients' money is invested. So the Qataris already do have a significant interest in Barclays as you suspected. On the flip side, though, I'd point out that under 60% of Barclays business is actually UK-based. Barclays is a global business with a global shareholder base.
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# 23
As of yesterday, the largest ordinary shareholders in Barclays were Qatar Holding LLC, with 6.25%. Other major shareholders were Lloyds TSB with 5.01%, Axa (4.34%), and L and G (3.98%). The Lloyds, Axa, and L and G holdings will be in their investment funds, ie held on behalf of pension funds, people's ISA etc. It's just a quirk of the disclosure rules that these have to be included in the institutions' reports where they have discretionary control over how their clients' money is invested. So the Qataris already do have a significant interest in Barclays as you suspected. On the flip side, though, I'd point out that under 60% of Barclays business is actually UK-based. Barclays is a global business with a global shareholder base.
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Barclays? Abuse of other peoples money?
Now Theres A Thought!
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Goodness me!
I have been referred to the moderators for
REeducation.
I have a personality flaw.
The Flaw must be corrected.
I must be exterminated.
I must face a Darlek.
I am a Darlek.
ZAP.
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12 Guy Croft
Hi Guy,
It looks like a big walkaway by the government. The strategy seems to be to leap the gap and land on the upturn. Could well be leaping off a cliff. No upturn in sight. The scale of the problem could be major. Not heard anything sensible yet to deal with it.
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Sadly, Robert's moderators are not of Robert's quality - they banned a posting of mine for using Latin and mediaeval Anglo-flemish a while back, simply because they weren't modern English - the trouble is, we were talking about old English so they were apposite. The lesson is, if blocked, repost less controversially.
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Number 8, sjpepper - is that you Bob Diamond?
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Erm, public-owned and privately managed bank seeks finance that doesn't put non-commercial constraints on it, limits shareholder dividends or bonuses.
Sorry, but Barclays dealings are for Barclays, their share-holders and the FSA to discuss.
The rest just sounds like sour grapes Robert because they wouldn't take the government schilling.
As #38 said,
Let's compare their share prices and profitability in five years time.
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HEY THERE MESSRS GORDY DARLING & MANDELSON.
Ive just had the bank on the phone to say one of our customers has bounced a cheque for £1,837,562.93 pounds sterling.
Perhaps HMG would like to cover that one??
So its action stations to place them in Administration.
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My oh my, lots of referred to moderator on this blog.
I wonder why that is?
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#36
I recently suggested here that Barclays and British are mutually incompatible concepts. Perhaps the best approach might be to ensure they are unable to claim HMG support when things go pearshaped, as they doubtless will soon with this shower in charge.
So where are the global regulators when we need them? I'm talking about the World Bank/IMF, of course - but oh, how stupid, they're not really globally orientated, any more than the WTC are. Such is hegemony. And that's why the wheels are falling off fast.
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27 jaypee28bpr
I had a block when I used the word manipulation so I just dont bother using it anymore. I understand that website operators are responsible for the content posted by individuals which would make somebody somewhere uncomfortable but it is a bit rich when some comments posted here become effectively news story topic headlines or reporting themes on the same host site a day or two later. Again and again points raised are proved valid. Sure there are spoofs and activists and spin doctors, but so what. You dont get those in boardrooms or the House of Commons backrooms do you.
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Alexander, you've been watching too much Spooks!
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Wow, the mods are strict today. All I did was suggest that Robert was annoyed he can't get the inside scoop at Barclays like he can at other banks. Not sure why it's been referred???
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Barclays seem incomprehensibly incompetent - and these people are still deemed sufficiently competent to run a major Bank, by the regualtors - their licence should be suspended now.
Are there any standards of probity in business?
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#46
Nope, I'm not Bob (or should it be Bod) Diamond. Wish I was - I'd be quite happy with his basic salary without any bonus.
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48,
Did they charge you a 25 quid fee for that ?
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Fascinating stuff. If Robert's analysis is correct, then it seems that Barclays have indeed been very wasteful with shareholders' money.
The real question is, was this just sheer incompetence, or was there some quid pro quo: some nice backhanders or (perish the thought!) hospitality aboard some nice yachts?
Probably doesn't make any difference to whether it's right to get rid of the board of directors, but might make a difference to whether there is any cause for legal action.
How about some good old fashioned investigative journalism to find out?
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As before; we all need to complain regarding the Moderation 'POLICY'.
I have been stunned by the Censorship on these blogs.
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rahere post 52
We dont do Television in our house,so its not down to Spooks.
Its down to REALITY.
No T.V. since 1980.
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Marcus Agius should definitely resign. He's completely failed to do his job and act in the interests of shareholders. He's also on the BBC's board and I certainly don't trust him to look after the interests of licence fee payers.
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Well there are a number of reasons:
Thanks to a nameless reporter - probably acting on what he was told by the treasury - the impression was formed that UK banks absolutely had to raise new capital. Also "early next year" is a matter of weeks away, which in a capital raising environment in this market isn't that long a period of time. If you run barclays you really want to be the guy doing a Dick Fuld - we had plenty of offers, we negotiated hard but in the end couldn't raise the money - or you want to play safe and fight another day. Of course they could have taken government money with the T&Cs on that cash changing depending on how GB and AD feel that day. I bet fast forward a couple of years when you look at HBOS-LTSB-Gosbank that BARCL won't look so stupid after all...
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OK time's up on the foolish notion that these are "not normal times".
Normal is an illusion; change is constant. Our culture, planet, universe - and absolutely everything within it - is constantly evolving.
Those seeking to revert to "normal" are really seeking to rewind time to a previous state of the evolutionary system - and yet there is not a single documented instance of this ever occuring in the real world.
The past is the past; the future is different, and that's all there is to it.
Rather than wistfully pursuing an impossibility, today's decision-makers should instead be concentrating on forging a new state of existence based on reality as it has become, rather than what it was, or what they want it to be.
They are just humans, how can they tell what is the best system for now? Only the system knows that, and nothing will stop it shaping itself to match.
Claiming that these are "not normal times" is simply admitting that one's existing policy structures and belief systems and world views are inadequate to deal with the current state of affairs.
The answer to the problem is not to try and set reality back so that it matches the model. The answer to the problem is to adjust the model until it works with the new reality.
What that means for today's leaders is to stop wishing for yesterday, go back to the drawing board and come up with a sustainable model that can cope with the fluctuations observed.
Until this is done, there will be mere bleating for times gone by, while the real world tanks.
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Why is anyone surprised that Barclays 4 Exec Directors will not take their bonuses this year?
At the rate their diluting everyone's holdings and the damage they do to the balance sheet by handing hundreds of millions offshore - they'd be worth about as much as 2 front-row tickets to a Gordon Brown financial management seminar anyway
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Re 56 javaman 1984
I didnt ask,i was shaking with anger.
To give you an idea it will cost £8000.00 sterling to place them in administration.
My plan is to take them over and move into retailing.
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A bit of backscratching going on here?
Barclays Executive - "If we give you a bit of an unnecessary sweetener here, will you see us right when we're chucked out of our jobs in the UK?"
Shady Sheikh - "Of course, old boy..." [educated at Eton, of course] "...would a percentage of the sweetener do, or would you prefer a seat on the board?"
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Re javaman1984 post 56
I didnt ask about that,i was shaking with anger.
To give you an idea putting them in Administration will cost £8000.00 pounds.
My idea is to take them over and go into retailing,we make the stuff we might aswell retail it.
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#8, again that's because he is an HMG Treasury mouthpiece. He only regurgitates what AD and GB give him.
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My God,
you couldn't make it up.
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Come on Robert - we're bored with this one now.
Surely GB & AD have given you the results of the Lloyds shareholder vote by now?
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Robert’s article leads to other questions - the big picture.
The big picture being a cash rich investor (sovereign funds etc...) have no interest in investing in stocks (far too old school), it’s much more interesting to attach instruments to the balance sheet of the entity (such as barclays) which extracts any future value out of the entity to the holders of these instruments rather than the long term investors holding stock, thus creating an “upside neutral” situation for the share price.
You have to be seriously concerned about the future value of pension funds - as these new dynamics kick in to the capital markets.
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Have just heard Robert on Radio4 advising that the recapitalising of the banks was never meant to start them lending again, but merely to stop them collapsing -
This isn't what I agreed to!!!
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64,
Sorry mate, couldn't resist. Hope all goes well for you.
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Hold on! We (the shareholders) haven't approved this deal yet.
Seems to me we shouldn't.
A rights issue with Qutar picking up whatever doesn't sell would be fair.
I wouldn't even mind too much paying them £300M in that case.
I'm voting against - if I can find out how to vote stock held in a Barclays Stockbrokers ISA!
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alexandercurzon,
I have referred all of your off-topic posts to the moderators. You may of course refer this post to the moderators.
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62, I agree with you. Seems that there are two old fashioned principles which are also still being yearned after by our "great" leaders....
1. That "controlled" information is good for us all.
2. That public confidence has no place in economic theory, yet will return to previous levels.
This time around, the internet has completely blown the power bubble of information.... and the public are no longer as brainless as we perhaps used to be.
This could be the first silent revolution. Welcome to Globalisation, where Fiat currency is supported by Fiat confidence. All very taxing indeed!
Can I repeat, this is all a result of the leveraging by banks to jump in to the investment market. They gambled with money that they did not have. Now UK PLC is trying to do the same. What a fiasco.
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#70, these sort of instruments have been around for over 20 years. There existence is for a simple reason:
1) Equity is expensive to give away, there is only so much of the pie you can give away. On the other hand, it has some tax benefits for investor and also the common shares don't promise any specific payout. So this should be your last choice.
2) Debt on the other hand is not limited by amount but rather by what you can raise. It is more tax efficient as you can claim the interest payments as an expense - as opposed to dividends which must come out of post-tax profits. But you must make the payments or else and too much debt means your company gets downgraded.
So what you want are products that are sort of equity from a credit rating perspective but debt from a dilution and tax perspective. Hence these hybrid instruments, yet another financial market created by idiotic and arbitrary distinctions.
And your pension fund will be loaded up on them....
As for the specifics of the BARCL investment with a 14% coupon I will bet money there is some sort of conversion clause or it is callable - which means the debt can be paid back early if BARCL finds a cheaper funding source. Coupled with some nice tax efficiencies - which will knock 30% off the coupon paid in real terms - I am sure that all BARCL have really done is put a ceiling on their cost of capital.
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#73, Mr RP seems to generally have problems with tenses....
http://www.newsroom.barclays.co.uk/content/Detail.asp?ReleaseID=1472&NewsAreaID=2
you'll vote on it in 6 days. You need to make sure you can vote your shares and they are registered with CREST in your name and not in a nominee account - of course there maybe some fine print in the ISA that doesn't let you do this as nominee accounts are cheaper for brokers. Never really worked on this side of the business so you should get expert advice...
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What is the obsession with Barclays?
Is it not a good thing that they are (currently) standing on their own 2 feet and not looking direct taxpayer support?
If they have done a sub optimal deal then that is a shareholder matter.
It is wholly mendacious to seek to link this deal to a destruction of pension fund values. Pensions have been essentially destroyed by a multiplicity of events and policies over many years - one more or one less at this stage of the game is not likely to make much of a difference to aggregate pensions.
This plus the HBOS fandango is simply a regurgitation of Treasury political posturing.
The fact that they have time to spend on such trivia is probably instructive as to just how switched on they are with regard to the real problems - and just how likely it is that will ever adopt a straightforward truthful approach to anything.
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I agree about the deletion policy. Surely this is a forum for comments, clearly from readers of Robert Peston, not the man himself? They have the standard disclaimer "Does not express the views of the BBC", etc on the site, so where's the harm.
At the very least, they should be "post moderated", not "pre moderated" and the criteria needs seriously relaxed.
We're not children, don't treat us as such or we'll find another outlet for our views!
I find it quite galling that the BBC, which covets and defends its right to journalistic freedom and free speech so closely feels it has the right to censor it's viewers!
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This beggers belief .How can these directors continue in their positions .In the real world I would be sacked for this lack of judgement and clear panic .They are supposed to be the professionals in their field ? The investment funds of Abu Dhabi and Qtar must be have a good laugh at our expense .I am totaly disolusioned and confused.com !!!
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This is light touch regulation, how can they do all these without government permission. Government has to do something about this, might be time to investigate for gross negligence and put few in prison.
Only one thing that hasn't been considered; how much new investors will be able to get back; probably next to noting at 14% interest rate.
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# 77
To be fair to the brokers here, it's not actually their cost structure that is behind the use of nominee accounts in ISAs. Rather it is an Inland Revenue requirement to prevent tax avoidance within tax-advantaged wrappers like them (the same is true of self-invested pensions for instance).
I don't know what Barclays Stockbrokers policy is on allowing voting by underlying holders of stocks held in ISAs. I suspect they facilitate it but maybe make a charge. I use Barclays Stockbrokers for all my stuff, and they certainly allow clients to give instructions on corportate actions (rights issues, takeovers etc) in non-ISA accounts held through their nominee service. In any case, given the potential conflict of interest here, I'd be surprised if they wouldn't allow clients to vote on the Barclays capital raising and/or sacking the Directors. Might need a bit of pushing and speaking to people a few rungs north of the call centre, but I'll bet they've already got a contingency for this. I've found their stockbroking customer service to be pretty good. I don't work for Barclays incidentally, nor do I have any Barclays shares!
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#59
No TV since 1980.
You missed 'The Office'. It was great.
You should buy a TV and switch to the comedy channel.
You could do with a good laugh. Being so angry and obsessive will kill you.
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Yes - very interesting but I am not sure that Barclays are not just trying to find funds, but that something else is going on - they may be aware of trouble ahead. I agree with #12 that Banks have really become irrelevant they don't seem to be able to operate as a business to all intents and purposes they are just clearing Banks. I have said this previously on HYS comments because I think, ultimately, the big Banks are going to fail. How long can they keep on re-funding themselves before they have to open the door to the vault and see all the debt they are holding?
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Think there's a typo in the 11th paragraph. It should read:
Perhaps unsurprisingly, although Qatar and Abu Dhabi were prepared to release £500m of the RESERVE CAPITAL INSTRUMENTS for sale to other investors - following complaints from British investors that they should have been offered these in the first place - the Gulf investors didn't give back any of the commission or warrants.
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It sounds as if Knacker of the Yard should investigate.
However it would probably be pointless, because the feudal rulers of oil rich states are involved and so the DPP would rule that prosecution was not in the public interest, as it did in the BAE case. They might threaten to stop telling us about any of their subjects who might be planning a terrorist attack in the UK.
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Interesting piece of research out today from JPMorgan on UK banks prospects, and courtesy to Barclays Stockbrokers for the summary. Per the Barclays summary:
"Banking profitability will not be the same for a long while, according to JP Morgan, which has issued a downbeat assessment of the prospects for UK banks.
JP Morgan (JPM) is sceptical over the government’s assurances that it will be an “arm’s length investor” and believes that “as the economy deteriorates the government is likely to be pressed to exert more influence.”
Though JPM confesses it does not know what impact the government’s involvement will have on earnings, it is assuming that there will be less significant margin growth in the low interest rate environment, while the fixed cost of writing business will be more expensive.
The US bank has cut its earnings estimates for the UK banking sector by 31% for 2009 and by 34% in 2010. It expects sector Return on Equity to fall in the range of 6-10%.
JP Morgan remains underweight on the sector and has reduced its price targets for the major players as follows: post-merger Lloyds Banking from 180p to 110p (pro-forma); Barclays (from 210p to 150p), Royal Bank of Scotland (from 120p to 50p) and HSBC (from 720p to 675p).
Lloyds TSB remains its least preferred stock in the sector, with HSBC the best of a bad bunch. JP Morgan believes the synergy targets after the Lloyds TSB and HBOS merger will be hard to achieve and capital shortages remain. The possibility of HBOS continuing as an independent entity is discounted, as the cost of preference capital and government debts guarantees, combined with rising impairments, would wipe out profitability.
Meanwhile Broker Panmure Gordon has also been sticking the boot into HSBC, dropping its rating from “neutral” to “sell” and scything its price target from 810p to 615p in recognition of the worsening global economic outlook. The broker observes that although it has avoided the need to ask for a government hand-out, its Tier 1 capital ratio has eased to 8.9%, which is below the 10% average for the European banking industry."
UBS has also been looking at European banks, and described earnings prospects for next year as "dreadful".
In short, anyone who thinks that any bank is currently a good investment probably needs a good shaking to help them wake up from their strange dream.
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Since the future of such a major bank is an issure for so many beyond just the shareholders maybe when the Barclays shareholders meet the Board they will give some thought to telling them that they must stop DISPOSSESSING people in efforts to rebalance their books. There is more to banking than shareholders one might assume although you'd never guess reading this blog (an all the others).
A moratorium on repossessions and foreclosures etc etc, for say a year, to let people and firms sort themselves out. Not much fun being on the receiving end of that kind of thing.
No? Thought not. They all deserve it because they're irresponsible.
GC
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Re deletions: Who are the moderators?
What is their level of education - media studies?
I suspect some posts have been removed simply because those concerned did not have a broad enough education to understand what was being said.
Re Barclays and the other Banks. It seems to me that they were never, as Robert said "Formidable Moneymaking Machines": they were formidable parasitic entities which syphoned off for themselves wealth created by others. Now they are worse: they stop the wealth being created to start with. They have become a cancer in the body economic which should be excised. We need simple banks to perform simple functions.
#2 "Another inciteful post Robert"
Did you mean insightful? The post is certainly inciteful - inciting Barclays shareholders to revolt that is! ;-)
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From the BBC business pages:
Lloyds TSB shareholders voted 95.98% in favour of the takeover. They also approved plans to raise £5.5bn by issuing new shares and special preference shares.
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#82, at the bare least as a shareholder he can turn up and make some noise and demand they explain themselves - just like we can with the government.
However, in all truth as a retail holder he isn't going to have much of a say - the institutions will yah or nay it and with 6 days to go the probability they don't already have it in the bag is pretty low.
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"Many of us would love a bank to pay us that kind of interest"?
We all know that you are motivated strongly by the sound of your own voice, but to equate deposit rates with the return on quasi-equity is a pointless and misleading sound-bite of which you should be ashamed.
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All these people knocking RP for publishing on this subject should realise that
a) the banking sector is the news
and
b) existing shareholders and institutional investors have been shafted by not being offered any sort of rights issue to begin with
keep it coming please Robert!
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Something tells me Peston can't see the wood for the trees. Fair point on the commissions received , they do seem rather hefty. However, to suggest we as pensioners fret over GBP300m out the door is laughable in the context of the GBP42bn of Barclays' market value lost (and counting!) since start of year! Let's see, a fee recapitalise our bank and retain strength and independence going forward, or risk bankruptcy, hmm that's a tough one. Barclays shares already down 73% YTD; paying GBP300m is chump change.
Further, it appears Peson hasn't done his homework on the RCIs. The barclay's 14% RCI's are actually CHEAPER than the gov'ts 12% prefs AND don't come with ridiculous gov't strings attached. The fact is, these instruments are fully tax deductable for Barclays , making them a good 2-3% cheaper than taking up capital on the gov'ts terms. Barclays are being wise here in attempting to retain their independence. Boo hoo, shareholders get stuffed.. And?? ask N ROck shareholders what they would prefer? They can't have their cake and eat it too. Caveat Emptor.. If they don't like the terms then they, as existing shareholders, should've been willing to stump up the cash. Something tells me that was unlikely (hence the need to find a new outside investor!!). Barclays needed capital and needed it soon, and this is the result. And another point Peston, you moan us ordinary savers aren't getting these rates. But if ordinary savers want to be earning 14% , then they too can go to their broker and bid for outstanding prefs yielding anywhere from 10-27%. But then they too take that risk.
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No. 76
Thanks for the lesson in debt and equity!
A loan which has a default risk of basically zero, with a yield of 14%, plus warrants giving 1.5 billion shares at £1.97 - this is having your cake, eating it, and coming back for more, just in case theres a bit more to syphon off.
Then just to add to the cocktail, make it all tax efficient so the exchequer can technically finance the deal.
This is cynically constructed to the detriment of shareholders and ultimately the british people.
I feel sorry for shareholders and UK tax payers.... thankfully I'm neither!
No. 89
******
..... formidable parasitic entities which syphoned off for themselves wealth created by others. Now they are worse: they stop the wealth being created to start with. They have become a cancer in the body economic which should be excised.
******
How eloquently put -- so true!
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I have read all the comments.
Those contributors that complain about Robert Peston whilst ignoring the content of his articles deserve to be unpublished on the principle that fools alone just 'shoot the messenger'.
My background is not finance but I find Mr Peston's articles always informative, always educational and occasionally entertaining but more important well informed and written in an easy to understand style.
I read Mr Peston's and many other financial and economic blog sites to learn about financial matters and how to protect my very hard earned investments in retirement.
Smart ass Monday Quarterbacks leave Mr Peston to do his job, he is one of a few 'call it as I see it journalist' in a UK media full of political sycophants.
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Those contributors that complain about Robert Peston whilst ignoring the content of his articles deserve to be unpublished on the principle that fools alone just 'shoot the messenger'.
My background is not finance but I find Mr Peston's articles always informative, always educational and occasionally entertaining but more important well informed and written in an easy to understand style.
I read Mr Peston's and many other financial and economic blog sites to learn about financial matters and how to protect my very hard earned investments in retirement.
Smart ass Monday Quarterbacks leave Mr Peston to do his job, he is one of a few 'call it as I see it journalist' in a UK media full of political sycophants.
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How come top bankers can understand all this complex international finance, but dont understand that if they lend 500k on an ordinary little semi in Croydon they are probably going to lose their shirt.
It's the ordinary stuff that will break you.
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I note that the Barclays board has offered itself up for re-election thus allowing themselves and their actions to face the scrutiny of the shareholders. Maybe Mr. Preston could tout this idea with his buddies in the upper echelons of The Labour Party!!!
The 14% may seem ridiculous now, but it may not in the coming years when the government is forced to raise interest rates to stave off the pound collapsing. Under Major interest rates went up to 15%. The bottom line is we either stop borrowing and reduce the debt, or we will be forced to offer ever higher interest rates to temp anyone to lend to us. Basically, we are between a rock and hard place.
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Is there a floor with barclays share price when all this is is irrelevant as its been falling like a stone today.
Will the men in white coats be coming soon?
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Excellent blog, highly relevant and very well explained.
I really disagree with several people on this blog who indicate that you seem to be having a go at Barclays. As you say, the truth is, anyone who is the least bit concerned about their pension or investment, should at the very least be very concerned by the lack of thought Barclays have shown in trying to arrange this deal.
More to the point, if the Board did not think this was a massive error, why should 4 executive directors forego their bonus for 1 year as a direct result of this deal, (& not due to the credit crisis)? If Barclays get away with making such a huge mistake, missing 1 year's bonus is no sacrifice at all. A poor gesture at the least.
The board of Barclays have done a good job in running the company over the past 10 years, although greed has nearly it seems got the better of them in this Credit crisis....but this is a charge that can be placed on most banks.
From previous News bulletins, I believe Barclays are trying to avoid taking tax payer's money as it means that the government then have a say in the running of Barclays, be it indirectly. And ultimately the Barclays board are aware that if they took tax payers money, then there is little chance in the Government agreeing to the milions of pounds in bonuses that many Board members are likely to receive, even in later years.
To me, Barclays are in a little bit of financial trouble and need cash injections, but their refusal thus far not to take tax payers money, is in my opinion, not truely because it would mean some Government involvment in Barclays, but a key reason is actually Board members missing out on massive bonuses. It means, Barclays get their funding, Board members can give themselves massive bonuses and of course Barclays has no direct Government involvement at the Board level.
So if it is correct that Barclays have not taken any Government money, then the decision to actively and aggressively look for funds abroad is not just a matter of helping Barclays financially, but also personal greed from each Board member, as they then can receive their bonuses.
For the Board to put themselves for election they are counting on their track record to rescue them from this fatal error and ultimately for them to receive their bonuses. They also realise, if they are voted out, what then happens to the share price ? Who will take over ? Although it might seem brave for the Board to offer itself up for re-election, things are still very much in their favour.
If I was a shareholder I would look beyond this £300m sweetener - joke of a deal, realise Barclays need the money irrespective and vote the Board in. As a non-shareholder, I see a high degree of desperation due to the financial situation and personal greed in this fiasco, and thus would vote them out. But then this would mean that the 'right' people would need to replace them, and they would need to hit the ground running in a time of world wide crisis.
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guycroft wrote:
“..A moratorium on repossessions and foreclosures etc etc, for say a year, to let people and firms sort themselves out. Not much fun being on the receiving end of that kind of thing.
No? Thought not. They all deserve it because they're irresponsible.”
Being sympathetic with the people who may loose their only home, I have rather different feelings towards the landlords and the fate of their portfolios.
Any property which is not used for primary residence and is in arrears should be repossessed and sold (or nationalized) as soon as possible.
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All these people knocking RP for publishing on this subject should realise that
a) the banking sector is the news
#93 - it's part of the news not THE news.
Peoples backs being broken because of 'debt' and dragged thru the state's ghastly medieval repossession and foreclosure ritual? That is news too, but NEVER remarked upon here.
Banks as usual and bankers and shareholders hogging the limelight and squealling how important they are and RP right up with them reminding them how important they are. Slice of cake blah blah.
I am none of those things. I just happen to believe strongly that reminding people here and elsewhere of what is happening to ordinary folk right now is socially very important indeed and I chide RP (spokesman for the Banking Broadcasting Corporation) for not dwelling on it AT ALL and for talking interminably about banks and money per se.
It is utterly hypocritical as watching, say the Remembrance Day ceremony - and being glad it's some other mother's son who died.
We can't take it with us when we pass on, you know. There'll be judgement aplenty then for those who allowed their love of money to dominate their every waking thought. Spare a thought for those who have little enough and stand to lose it all as the banking juggernaut grinds their small lives to powder. For what?
GC
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This comment was removed because the moderators found it broke the House Rules.
Gordon says he is going to hold his breath until the Banks start lending again
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There are 2 types of people in this world, those in power and those who aren't.
Shareholders have to learn that being one is like a Democracy. You all have a vote, and you all think you have a say, but in reality it's very difficult to motivate the masses and ultimately there are one or two 'big players' who ultimately decide everything.
Moaning about loosing money as a shareholder is the same as all the people moaning about every Government not fulfilling it's manifesto promises.
You can either not participate or you have to get organised and overthrow the powerfull minority.
Ultimately the stock market panders to the greed of the individual. Why would you want to invest money in an institution where you could never hold more than an insignificant holding. Aren't you simply a pea sized boat on the Ocean - you at the mercy of the waves.
For the post financial meltdown, how about we all look closer to home. You could swap all your 'big time shares' for a reasonable share in local businesses where you can grow to be a sizeable investor with a big say in matters. Sure you can't 'diversify your risk' - but hey, who ever thought having a portfolio without a single financial was a low risk strategy last year??
The Barclays situation is a case in point. The big shareholders have been in on this deal and must have ratified it - and no-one else really matters.
Same for HBOS, NR or anyone else.
Remove the banks from the equation - lend to local businesses and spread the financial power.
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#74
to quote yourself
"neonPaulBB - What right do you have to criticize anything to do with this blog? If you don't like it, you don't have read."
Many of the off topic posts are the most interesting. Censorship is never acceptable.
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Banks are businesses. Obvious to the rest of us but they hate it when you go in for a 'quote' on the very basis that they are in the money business.
Ergo if banks are businesses then Gordo must support other businesses who don't happen to be in the money business.
Simple really.
I think I've been listening to Gordo too much.......must lie down.........zzzzzzzzzzzz
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None of the £500m was even offered to small shareholders - Barclays seems to have created two different classes of ordinary shareholders - institutional and other - so much for pre emption rights.
I hold my shares via - guess who - Barclays stockbrokers, who are the biggest nominee account holders, and was I requested to vote on such a substantial goveaway of the company by Barclays Stockbokers - of course not.
Given the dissatisfaction with the process at least Agius and the non-execs ought to resign, otherwise what example does this set for other major plc's?
Boards of quoted companies can apparently virtually get away with anything.
Sadly so many non-execs of quoted companies sit there nodding their heads sagely and agreeing with whatever rubbish they might be told by the execs.
Many are picked because they can be relied upon not to rock the boat and are friendly with the execs, who may in turn be non-execs on other boards both are on, knowing they bear little responsibility in practice but collecting huge fees for very little.
Given government and BoE incompetence coupled with many of the characters we have on many plc boards, who are clearly often not held in great esteem and whose abilities and motivations do not meet shareholders needs, who'd now be a small investor, or for that matter a large investor in equities, other than perhaps large foreign investors and private equity vultures who see the opportunity to fleece existing shareholders?
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@ #76 laughingblacksheep and #87 JayPee28bpr
Thanks for the really informative posts. They're examples of the best thing about these blogs: information and informed opinions that really help (me, anyway) understand what's going on behind the headlines and RP's provocative articles. There are many other helpful posts of course, but these I found especially good.
On the other hand . . .
The worst thing about these blogs is that the moderation policy or mechanism seems subject to abuse. I don't agree, as someone suggested (sorry, couldn't find the post), that the problem is ignorance on the part of the moderators. Presumably, they're "following orders", though how much leeway they have in interpreting these orders isn't clear. I've tried several times to get clarification on how the moderation policy is applied and have gotten no answer from the BBC or anyone posting to the blogs. I got a polite reply from BBC saying my questions had been referred to the group that supports the Web site. Surely the moderation policy is set by the BBC, not by the people who support the technology!?!
Maybe I sent my email to the wrong group; can anyone identify the best BBC address to send such questions to?
Here's a suggestion regarding moderation: Maybe there should be a (daily?) limit on the number of posts any individual can complain about (refer to mederators). This might help restrain people from using the referral process to personally censor posts they don't like.
Moderated blogs (like banking!) depend on trust. Trust depends in part on knowing what to expect, on knowing what the "rules" are, and that at some point they'll be applied fairly. (Hmm. Has this any relevance to the current financial situation?)
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Hmmm, the big bank story today - Lloyds shareholders voting on the HBoS deal. And what does Robert decide to blog on? Barclays... again...
You really seem to have a problem with the way there are dealing with the melt down of the banking industry that YOU triggered with your "news".
If your going to blog on them again please explain why you have a problem with them. Was it because they didn't go to the Tax payers for money? Is it that they are trying something you didn't think of / don't agree with? Or is it something more personal? If it that last thing then I think you need to step back from banking storys because you not being objective.
What we have is a bank that needs to raise funds to meet the new FSA requirements. Instead of going to the Tax payer and being sadled with tonns of red tape they try something new. Which is something Barclays knows well - they had the first ATM, the first saturday opening, and the first banking computer, so it's in there nature to do something new and different. Okay so the deal may be REALLY good for the people buying into the company - but is that a problem? The money you say that they have "lost" is there money - it's their profit, and at the end of the year they need to be factored into the books. At this moment in time Barclays is still making a profit - more then can be said for RBS.
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#96, "I read Mr Peston's and many other financial and economic blog sites to learn about financial matters and how to protect my very hard earned investments in retirement"
Oh dear. Do come off it, really!
If you have plenty tucked away for retirement and you worked jolly hard for it then bully for you!
With so many losing so much and so little I'm astonished you actually have the brass to come out and say so! Take your money out of wherever it's squirrelled away and put it under your mattress and be thankful you've got any savings at all!
Me - I expect to have to work till I drop dead on 6 day weeks 12hrs a day like the last ten thousand years and so be it I'm not complaining, but the bias of RP's articles is CONTINUALLY focussed on the same old stuff. Presumably so guys like you can get a good night's sleep after counting your dosh. Reconsider your 'retirement' a non-issue and instead work yourself to death as more and more people in Britain will now have to! Now see how lucky you really are.
All I am asking for is that JUST OCCASIONALLY he speak, as Business editor, for things other than investments and banks banks banks ie: for those in far less fortunate positions. That he never has hitherto which doesn't say much for his grasp of ethics even if he's the most dazzling business editor on the site. Born into title and money like so many are in Parliament itself, unlike mere proles like me, he probably hasn't got .... the faintest idea what I talking about. I imagine that's true of most posters here.
GC
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A few of these comments have been both obtuse and arrogant, for example MrRanter wrote:
"Just goes to show they have less of a clue than the average person in the street."
but this is an indefensible standpoint.
FACT: the financial acumen of bankers and investors far exeeds that of the average person on the street, hence their larger than average salaries, and banks continuing (barring recent events) to make profits.
FACT: the economic downturn is GLOBAL. One cannot presume to accuse ALL bankers universaly to be amoral and/or greedy.
I am sympathetic toward people with pensions who are concerned for their futures, but in actuality I believe it is better to make a compromise; a poor deal than to seek a bail-out from the tax-payer. Is it not in fact better that the money needed (need i remind you that many banks have required money to help them out, and most have gained this from the tax-payer) comes from foreign investment, than from our own pockets?
Would people with interests in Barclays rather pay for the bai-out from their own pocket?
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I’m surprised that throughout this debacle in the financial world I’ve not seen any reference to John Laws, probably the first “whiz kid banker” or gambler as he really was. Having read “The Moneymaker” by Janet Gleeson there seems to be some similarities, if not directly, but indirectly in what Laws set about to do and then ultimately to his cost and the cost of many others actually achieved. We are talking late 17th century, early 18th century. The book is an intriguing read and of course……….it could never happen now.
It seems that we never learn anything from the events of history.
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89 ,,Banks[owned by the shareholders ] are formidable money making machines , but bankers have been even more formidable at giving money away ,including to themselves in the form of bonuses derived from investment bubbles sold to their gullible shareholders before they pop
In the same way that lucifer[a bad steward] wanted what belonged by birthright to Adam in the garden of Eden ,bankers want what belongs to shareholders and conive to sepparate them from their wealth out of jealousy and surmising that they who hold the purse strings are God s
The decline of proper stuardship reflects the decline in Christianity
The deregulation of financial markets coincided with the retirement of the final tier of leadership formed from the youngest who sacrificed in and survived the second world war ,never to be adequately replaced
A 20 year old at the end of world war two ,would be retiring at 65 in 1990
A 20 year old after the Korean war would be retiring at the millenium .
Democracy without the 3 to 4 years leadership training aquired during the wars cannot prosper and unless alternative leadership training schemes trancending party politics are established it is doomed to failure and decomposition.
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This comment was removed because the moderators found it broke the House Rules.
Robert,
As an existing Barclays shareholder, I exercised my right to buy at £2.82 because I have every faith in the board.
Barclays have always had that certain je ne sais quoi,which ensured their survival over the last 300 years. They have made mistakes along the way-that happens in the risk business.
I have put my money where my mouth is (how many of your other correspondents can say that?). My father used to say "fools and bairns should never see a job half done". Let's diarise forward 12 months and see which of the high street banks leads the field.
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#102 - yup.
My MP Douglas Hogg - a self-proclaimed Liberterian (and darling of the Lincolnshire blue-rinse set) - is himself a landlord!
I have not been able to persuade him to back a campaign against dispossession and the chances of getting him to back what you suggest are slimmer still!
There are bad and good I guess. When I think of landlords now I think of Belvoir Lettings and the jolly rich chap on TV the other night who made his fortune out or, er lettings.
The feudal system in Scotland might be a problem, the entire aristocracy live off the income from let farms and cottages and always have I figure.
GC
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#91
That's definitely a problem/weakness of holding stock through a nominee: you can't go to the AGM/EGMs. Well, not unless the nominee appoints you as their proxy which will never happen. Most brokers do at least arrange for beneficial owners to get any shareholder perks (shop discounts etc), but that's not much use in cases like this where small shareholders just want the satisfaction of sounding off at people.
It's quite possible that at an AGM/EGM, the votes by show of hands could go against the Board (it's one person one vote at the AGM/EGM). But then the Chair just takes the vote to a poll, where all the proxy votes get counted and, a bit like a Labour Party conference, suddenly there's a gazillion votes supporting the Board and 2 blokes and a dog opposing. The Chair then queries the dog's right to be a registered shareholder, and the oppostion goes down to just the two blokes. That's shareholder activism!
If we want to learn a pretty boring but potentially important lesson for the future from all the fuss over banks' forced marriages, it is this. We need to see a push for activism to be pushed further down the food chain. So nominees need to be required to seek the views of beneficial shareholders before casting block votes. ISA, SIPP etc holders ought to be able to vote "their" shares. If custodians can allow this to happen for corporate actions (eg taking up rights, takeovers etc, then there's no reason why they can't do it for voting. They already do allow it for their big institutional clients.
A lot of people have lauded Vince Cable for his interventions in this crisis. I can't say I've been bowled over by him, but maybe if his fans think he's got "the little people's" interests at heart, then suggest he pushes for changes to the Companies Acts requiring beneficial owners to have voting rights, instead of the legal owner (ie the custodian/nominee name). After all, this does actually fit with Labour's general policy on activism, so the government can hardly oppose it. Alternatively, suggest it to John McFall, Chair of the Treasury Select Committee as this probably comes under his area of interest. Won't change anything in this crisis, but could make a differnce next time.
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# 94
Totally, absolutely, 100% right!
You'll probably be accused of being a Barclays Director now, and maybe you are one for all I know.
It is very dispiriting that, at a time when it's obvious that we need to see some clear, impartial education of the position we're in and how various parties are trying to resolve it, all we're getting from the BBC is the government line, with some added populism courtesy of RP.
I've been trying to work out why RP (and implicitly GB and Ally D) are so hung up on Barclays' actions. All I can think of is that they'ce got GBP billions out of the Middle East, while GB was told to go away when he visited. No idea why anyone would care about that, but it's the only reason I can come up with.
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# 96
This is meant to be ironic, right? RP only ever calls it as GB asks him to.
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#103 guycroft "We can't take it with us when we pass on, you know. There'll be judgement aplenty then for those who allowed their love of money to dominate their every waking thought. Spare a thought for those who have little enough and stand to lose it all as the banking juggernaut grinds their small lives to powder. For what?"
You are a decent bloke Guy, and I hope you can weather the storm.
I'm not sure about a moratorium on repossessions, but there certainly should be a moratorium on evictions and firesales of ordinary family homes while a more sensible strategy is worked out. In the present mess, having a load of empty housing stock will be very costly to society in many ways. In the short term at least, as others have suggested, some of these properties should be transferred to housing associations. In the meantime, we need a national recovery plan and individual recovery plans to help give people some hope and purpose for the future. I'm not in favour of rescuing failed institutions, but I AM in favour of rescuing people.
"Send not to know for whom the bell tolls - it tolls for thee" (John Donne)
"
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No. 71. Apollo-McQueen.
'Have just heard Robert on Radio4 advising that the recapitalising of the banks was never meant to start them lending again, but merely to stop them collapsing'
If this is true then it goes against all the media statements and spin put about at that time.
If true then I am absolutely livid and wild with anger. really.
I NEVER thought the banks should get money, but if it was all that was available for business support then so be it. I am now hanging from the ceiling by my fingernails
Words have failed me.
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#117 "Barclays have always had that certain je ne sais quoi"
- I don't know what either!
Sorry to people like Guy, if you think I'm being flippant - sometimes gallows humour is all that keeps one sane.
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112 and 121
Not very nice, I can take it and much more.
If you are that smart why are you not in my secure position ?
Those that lost money were debt driven fools
living beyond their financial and intellectual capabilities, dont feel sorry for them, they will do the same again, and again.
Savers are doing very well, we always do in another persons recession !
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#113...and you call others obtuse and arrogant, and (unless you are far to subtle for me) see no irony in writing the following
"FACT: the financial acumen of bankers and investors far exeeds that of the average person on the street, hence their larger than average salaries, and banks continuing (barring recent events) to make profits.
FACT: the economic downturn is GLOBAL. One cannot presume to accuse ALL bankers universaly to be amoral and/or greedy."
Facts normally need to be supported by evidence. What evidence do you have to support a correlation between financial acumen and "larger than average salaries" ? - The answer is you have none because no such evidence exists.
I don´t know what your second "Fact" really means. But one fact I have for you is that officers of public companies have a fiduciary duty to their shareholders to maximise profits. The maximisation of profits has nothing to do with either your or my definition of "morals." Therefore they are compelled by law to behave in an amoral fashion. Hence you can reasonably presume these people to be amoral - at least in so far as their working lives are concerned.
As you are so keen on facts it is another fact that the foregoing argument was deployed by Barclays to justify their long term operations in apartheid South Africa.
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#125 Have you ever heard of the word "humility"?.
I happen to have lost quite a lot of money - through an interesting mechanism called the Private Pensions business.
The main idea behind this is over a long period of time you save money into a pension fund. This money will then be managed by a 3rd party money manager. When you reach a certain age (laid down by law) you can access this pension fund and take a pension. of course this only works out provided the 3rd party money manager hasn´t invested your money in stocks or funds that have been wiped out or severely downgraded.
I´m struggling to see how this qualifies me as "a debt driven fool living beyond my financial or intellectual capability."
I´m not asking for your sympathy or sorrow, and I merely mention the foregoing simply to highlight your inane and vacuous thought process, which for some reason you have chosen to share with a wider audience than may be considered sensible.
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A few things to consider, if anyone is reading this.
October 2007 Barclays announces a "modest" 1.2bn loss.
December 2007 Barclays announces 5bn profit for the financial year and pay dividends.
March 2008 Barclays announces the need to raise 4bn (obviously that need was not present in December 2007...).
June 2008 Barclays announces further writedowns.
August 2008 Barclays announces 2bn profit for the half year.
October 2008 Barclays announces the need to raise 7bn.
A few questions. Where are these profits. If those profits were real it would have taken 3 months in 2007 and 3 months in 2008 to retain all the capital they would ever want and no need for rights issues. So what's going on ?
Robert, are you reading the balance sheets and the chairman's statements? What does "fair valuation of notes" mean? Marking debts to market maybe?
How can anyone say that they made a profit of 10bn in 2007 and 2008 but they need to raise 11bn from new capital injections.
I do not believe there is a penny of profits. I think it is all losses being offseted by raising new capital.
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#125 One day you may be old and infirm, and depending upon how much your family love you, or can cope, you may or may not end up in a nursing home.
Where I live, the people who work there do so for 12 hour shifts on the minimum wage, cleaning up the incontinent, and holding the hands of the dying. They will be kind to you even if you are rude or unpleasant.
This happens because we live in a society with some social cohesion. If that goes, as it might if this depression becomes really bad, there will be no-one in a "secure position" Then the strong and brutal will rule, for a while, until they are deposed by someone stronger. Look at human history, most great civilisations have been overtaken by barbarism sooner or later. What price your alleged "intellectual superiority" then? I hope I don't live to find out!
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#127
Sorry to hear that.
However this is
1)
The government laying the law and ensuring the longevity of the insurance companies in the UK. Because you are not allowed to have your pension anywhere else, you HAVE to pay commission to the insurance companies for losing your money.
2)
Your misunderstanding of pensions and investments. You have been led to think that money "invested" somehow "magically" will grow and at 65 you will have a sizeable pot.
The truth is however that for every successful investment there must be a loss making one. You cannot win, but noone has told you. The only way to walk out unscathed is to move in and out at the right time, and even if you win on that occasion, someone else will lose, may be one of your relatives or a neighbour. But winnings do not come free.
3) Throw away the pension companies, and just buy gilts and put them in a SIPP. You may lose on inflation but at least you will not lose your capital. Any other investment is a gamble, you might as well bet on horses.
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The commissions given away as a sweetner by the management currently represent 3% of Barclay's net worth on the stock exchange today (£10 billion)
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RE post 125
I Pity you what an unpleasant post.
Would you like to deal with the bounced cheque we had today.
I dont owe any money to any banks etc,but not being paid hurts.
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#27 "He also fails to make the connection that if, indeed, banks paid us all 14% on our deposit accounts, we'd all have to pay about 16% for our mortgages to make the economics work."
Oh no, we won't. We'll just mortgage our property to NR for a government dictated rate of about 8% interest and use that money to deposit/invest in a bank paying us interest at 14% and pocket the difference (less the amount extracted by HM Vampires, oops sorry, I mean Honoured Inspectors of Taxes, of course) !!
This is known in the business as "the carry trade" and is what was practiced by the Icelandic banks between borrowing from Japan (low interest) and lending in Iceland (high interest) !!
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#119 "then suggest he pushes for changes to the Companies Acts requiring beneficial owners to have voting rights, instead of the legal owner (ie the custodian/nominee name)."
Extending that scenario further, it will significantly increase the cost of managing the asset(s) for the beneficial owner to the point where the ROI (Return On Investment) is less than the cost of management; which rather defeats the whole purpose of such investments in the first case.
Such changes in law will only benefit the rich (who do not need it) and the reasonably well off (who are too busy making money to be too worried about activism) because they are the ones with large enough sums to invest to make the investments worthwhile. The small investors will lose out big time, which, again, defeats the purpose of changing the law !!
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#125, there is meant to be a phrase pride cometh before the fall. You are a saver? In GBP? with negative real interest rates? In a depreciating currency? You honestly think you are "doing well"?
#96, and that probably explains why you find RP "informative"....
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#106 "Remove the banks from the equation - lend to local businesses and spread the financial power."
This is all very nice, as all the mice agreed at their meeting until the question turned to who will tie the bell on the cat's neck !!
The "bell" in this case is that Britain imports masses of necessities. In order to import that, businesses need L/Cs (Letters of Credit) to facilitate their trades. The alternative is heavily armed merchantmen to transport tons of *real* gold from the buyer to the supplier (and try not to do so anywhere near Somalia) !!
Without banks, there will be no L/Cs !! In the days of yore, when knights were gore, and I was a wee lad in the City of London, there was something called ECGD (Export Credit Guarantee Department) which helped British business *export* to the world. I do not remember ever having heard of an ICGD (Import Credit Guarantee Department) !!
So no imports means no more vindaloos after the pub since there will be no spices.
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#105 "Gordon says he is going to hold his breath until the Banks start lending again"
What a dreadful image !! The picture of an exploded Gordon splattered all over the landscape, and pollution it, is too horrible to contemplate !!
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# 134
I doubt it. The cost is insignificant. Custodians already offer the voting service to institutional clients. Also, corporate actions (electing for scrip v cash divis; taking up rights; accepting takeover offers etc) are already routinely passed down to retail investors by brokers offering nominee services. Passing on voting rights is no different. You'll find at the moment these shares are simply not being voted, which is actually contrary to government policy on encouraging shareholder activism. All that my suggestion entails is that brokers offer their nominee clients the chance to vote "their" shares (limit the service to online in order to reduce the workload), then add them up and vote part of the nominee holding "Yes" and part "No".
Put another way, if everyone said that they wanted to hold stock in physical form (ie have paper share certs) in order to be registered on the company register and be able to vote, that would have a much bigger cost impact for the brokers and their clients than simply collating votes for recording via CREST.
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#98 "but dont understand that if they lend 500k on an ordinary little semi in Croydon they are probably going to lose their shirt."
Just give sterling a few years to devalue and 500k for "an ordinary little semi in Croydon" will be cheap at twice the price !! Of course a loaf of bread will cost 10 quid !!
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#138 What you have said is true up to a certain point. When the amounts of shares per shareholder are too small and the number of beneficial shareholders are sufficiently large, the Law of Diminishing Returns kick in !!
It is also true that the use of electronics will alleviate some/much of the costs and has done much to improve these situations.
However, this is an intellectually interesting exercise but still does not negate the fact that the large institutional investors will swamp the small activists.
In much the same way that a union leader casting 2 million votes on behalf of his members will swamp the activists supporting their local MP !!
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Can you still get these RCIs or is it a done deal?
I would definately be in the market for 14% return on capital, as I would expect loads of pension funds and other money managers, especially with interest rates at 3% and falling.
It's not like those sovereign wealth funds need the money, is it.
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#141, sure you can buy some.... Look forward to reading your moaning about how you didn't know about the risks in a couple of years!!!
I'll keep and eye out.
PS The SWFs have lost a ton of money....
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#130, pensions always were and remain a scam.... Take any spare cash you may have and pay down any debt you may have and then check the rate on govie linkers. That way you get some inflation proof or try national savings....
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#142 CITIC, the Chinese SWF, lost literally billions in its earlier days due to various internal scams and the fact that the "managers" were political appointees with little or no experience of dealing with such large amounts of cash. The Chinese government was not amused and a significant number of those early managers were made into involuntary honoured ancestors. That seriously encouraged the rest. Now, they are very much more careful about what they invest in and I believe they are showing quite a bit of profit; both in cash AND in political capital !!
Temasek, the Singaporean SWF, had showed profits from the start because it was managed by experienced people, hand picked and recruited from around the world for their skills and knowledge and very well remunerated !! It is current run, through sheer coincidence, of course, by the wife of the current Singapore PM and the daughter-in-law of the first PM.
The current perceived wisdom is that anything these guys bet on is always worth a good hard look !!
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Barclays Main Board of Directors should be voted out of office forthwith. Collectively, to stay out of the clutches of the Governement, they have shown little acumen or foresight.Let there be an election from as wide a spread of academics and business people as possible and maybe what was a very profitable bank will find a sensible way forward.
Never forget banks can make money by basically doing nothing. No bank needs to get involved with sophisiticated instruments which they do not understand. eg Barings.
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When a transaction between the Arabs and one of the biggest British banks looks unfauvorable for one part, there could be a simle reason. Not all details may have been disclosed.
Oddly enough the size of the premium paid to take the RCI's I guess could align with the size of the directors lost bonuses over the 10 years.
Must have been hard just giving all this money away, for no apparent purpose...
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#145 "Never forget banks can make money by basically doing nothing. No bank needs to get involved with sophisiticated instruments which they do not understand. eg Barings."
Barings ?? Que ?? I thought it was Nick Leeson's wild trading/bets that did in Barings, not dodgy instruments !!
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# 140
Re swamping of small shareholders. Mitigating this depends just how far you force institutions to distribute voting rights to the true beneficial owners. The biggest pool of capital in the UK is defined benefit pension schemes. At present, most of these will actually be voting their shares, but on a "block vote" basis, ie with no reference to the underlying members of the scheme. Could pension schemes be required to refer all shareholder votes to the membership? Probably not. There are too many and in any case most aren't contentious and the membership would be wholly apathetic about them. However, pension schemes could be required to put their voting policies to the membership and seek approval of them, so that the policy at least is better known. For instance, I bet most pension scheme members would be shocked to learn that a large number of pension schemes have a standing policy of "vote with management", ie they simply leave standing instructions with their custodian to vote all their shares however a company's Directors recommend with no thought about it at all.
Exactly the same approach could be adopted with mutual funds (OEICs/Unit Trusts). Make Fund Boards disclose their voting policy to unitholders, and require them to approve them at the Funds' own AGMs. Then allow unit holders details of how voted were cast. This type of reporting is already provided by fund companies to institutional investors in their Funds, so it's just a case of increasing the number of people with access.
Basically, what I'm saying is that, ultimately, all shareholdings are owned beneficially by small shareholders. It's just that much of these holdings are aggregated in collective structures right now. With a bit of effort and encouragement the use of the votes attached to these shares can be pushed down from unrepresentative fund managers to the true owners (the ones with the real economic risk after all). Thatcher did this very successfully with Trade Union abuse in the 1980s. Brown ought to be able to do the same with the fund management industry.
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ref 61.
I hope you are right laughing black sheep, Barclays have nearly all our retirement fund. They call it Barclays Wealth. They seem to have mislaid a large percentage of it which makes it Barclays Steal(th) when viewed from my chair. We're both in our sixties, still working hard and needed to take financial advice as to what is best to do with money. Shame on them they did not know. Shame on them they did not revisit their investors portfolios and do a better job, move the money or just limit the damage. I don't understand how they can claim to be profitable when they have lost so much of their investors money. Is there anyone out there with good advice? All clues welcome
Regards to all, surelyitsajoke
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Was it a panic move, or premeditated! I wonder? Whenever the motive is money all I see are conspirsories, for those involved its all to easy to re-sign......jail sentance perhaps more fitting!!!!
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Everyone kows that it is custom and practice for senior UK bankers to reward themselves with astronomical sums of money in the form of bonus payments. Regardless of what happens in the wider economy senior bankers always manage to trouser or walk away with their bonuses intact, even when times are not so good in the rest of the economy.
On that premise could the reason behind why Barclays paid such a huge sweetner to Qatar and Abu Dhabi to buy £3bn of Barclays Reserve Capital Investments was some form of surety to guarentee that the bankers future bonus payments and pension pots will be in line with their ususal expepectations. If so then that might go someway towards explaining why the banks will go to almost any lengths to ensure they are not beholden to the government.
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no. 126 - fair play to you. You have me. I am one of the 'average guys' that MrRanter talked about and as such was upset that he assumed I could run a bank better than a longstanding banker. I hope you'll forgive my ignorance but the bullet format was merely a device for hammering home a vast sweeping statement. In summary: I do not purport to have any knowledge of banking and it annoys me when other 'average guys' do so. It is the old football situation - 'what is the manager doing?!' 'i could do much better' 'he's doing it all wrong' without any of the (dare i say it) facts.
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Do you think the reason this is bassed around the conditions set by the bank of England and government if they had used their money?
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#153 of course it is. Look at what AD is now proposing.... You want to be negotiating against that why the gov propping you up or not?
Buy BARCL, HBSC, short HBOS, LTSB, RBOS and GBP.
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I am just one of millions of people who do not really understand all the details of the current banking situation. What I would like to hear is a sensible opinion and not one that comes from someone who seems to change his mind daily on which particular axe to grind! I find that with each passing day the spoon stirring by the media seems to get worse and is of no real help to anyone.
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Excellent piece by Robert, as is to be expected.
Barclays shareholders may want to review the way the bank is treating the customers of one of it's subsidiaries, FirstPlus.
Many of those customers are in open revolt over Barclays obfuscation over interest rates charged on Firstplus second charge mortgages.
These loans were advertised as "variable interest" but the only invariable thing about them is that invariably the rates charged have gone up and stayed up - despite BoE and other inter bank rates plummeting - with most customers now paying in excess of BoE base plus 10%.
So poor has their management been of Firstplus that they are on course for massive losses as defaults go through the roof.
Multiple complaints have been lodged with the FSA and OFT. Where those will leave Barclays from a reputational perspective will, no doubt, become another headache for shareholders.
As a Barclays customer and Firstplus customer I am leaving them both and have moved to "Brown's Bank" - HBOS.
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Love it. Excellent article. I would also have a look at their P&l as to how they have valued expected proceeds from people ore paying their mortgages, the so called effective interest rates. Alot of creative accounting around no wonder the city is beginning to disbelieve the very fabric of banks accounting and audit. The share audacity of reporting 6bn profits and asking for 10bn capital injection makes the mind boggle.
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