Lloyds to convert?
It's slightly odd that the penny should at last have dropped for investors - that if Barclays says it's profitable and doesn't need to raise new capital, then that's to be believed.
For a bank to have to give this reassurance in the form of an open letter from the chairman and chief executive is highly unusual. And the message they delivered wasn't new.
The bank has been shouting that it's in reasonable nick for 10 days, ever since the steep slide in its share price began.
Only belatedly have investors realised that Barclays could not make such confident statements without the approval of its auditors and also that of the City watchdog, the Financial Services Authority - and that surely they can't all be wrong.
What's good for Barclays' share price has also had a more modest positive effect on shares in Lloyds.
As for Lloyds, I'm hearing that it may yet follow the lead of Royal Bank of Scotland by converting £4bn of preference shares held by the government into ordinary shares.
That would save it just under £500m a year in dividend payments, but would see taxpayers' stake in Lloyds rise to well over 50%.
Lloyds has been signalling that it does not want to be nationalised to that extent. If it's so desperate to prevent public ownership going through the 50% threshold, it could try to persuade UK Financial Investments, which holds the investment on behalf of the Treasury, that the new shares should not carry any votes.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~23~RS~)
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Yes, this week could be a turning-point for Barclays.
They their reasons - understandable if not indisputable - for resisting government money the first time around, and those reasons may persist awhile longer.
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As a Lloyds shareholder, would the company be in better nick without the HBOS add-on?
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If, like me, you fee that reading Robert Peston's blog is sometimes akin to reading Government pre-leaks and propaganda (my opinion - not necessarily fact), try turning to the BBC's other Economics Editor's blog (Paul Mason who is the BBC's Newsnight Economics Editor).
That BBC blog seems to me to be real journalism, and capture much of the real mood and circumstances of the economy nowadays. He tells it straight.
Just search for 'Paul Mason blog' in Google, or in the BBC search bar.
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If the banks are, after all, in reasonably good nick then why are they no doing what the Government is asking of them and lending to all and sundry?
Could it be that things have now reached the stage that, for all the injections of cash and all the guarantees things are looking so bleak that they're just not up for it?
If so, then you have to ask whether all that Government (ie our) money might have been better spent helping out the victims of the credit boom - rather than the perpetrators.
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Or it could ask UK Financial Investments to have a non-interference policy unless it is to vote out any directors who act irresponsibly with tax payers money.
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tell them to sod off then, a get the bank for zip!
Cheeky buggers!!!
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Would someone be kind enough to explain why my 50,000 GBP Savings would be better off in a de facto nationalised RBS or Lloyds TSB (or whatever name it becomes) compared to the independent and privatised Barclays Bank?
Likewise, if my salary were to be paid into Lloyds or RBS is it safe or should I transfer to Barclays?
Or, is this all really all about that the only people who are crying crocodile tears about whether Lloyds TSB or RBS is "owned by the tax-payers" are their Bankers who can see their Bonuses for next year being somewhat constrained unless they can either do a deal with "UK Financial Investments" to not enforce the voting rights if the shares are converted to ordinary shares. Compared to Barclays who are fighting tooth and nail to ensure the FAS, their investors, their customers, the general public and the Government agree for their bank to stay in private hands and ensure their annual bonuses remain massive.
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Robert,
I think there's a better way of getting what every one wants here. The problem we have here is that if Lloyds converts the prefs to ords and, by extension, the government owns the ords, then it has majority ownership of the company.
The solution is to find a way of making ownership of the ords attractive to other (private sector) shareholders.
What is to stop Treasury from guaranteeing such shareholders against loss of value of the shares for some period ot time? 3 years? 5 years? Basically the shareholder would be guaranteed not to lose money versus the price paid for the converted prefs for the agreed period, provided they hold the stock. Lloyds gets rid of its burdensome prefs that currently encorage it to shrink its asset base and capital requirement, and it avoids being majority owned by the governement.
In the above scenario, there would be nothing to stop the shareholder selling the shares. If they are above the guarantee price, the shareholder keeps the profit. If below (and sold within the guarantee period), the shareholder also suffers the loss, and the guarantee passes to the new shareholder. Throughout the period, the guaranteed price is fixed. So, let's say Lloyds converts at 50 pence/share. The shareholder with the guarantee sells at 60 pence. They keep the 10 pence profit. Somebody will buy the shares at 60 pence, and they will be still have a guaratee against loss, but at the 50 pence level not 60 pence.
If there are matters of particular embarrasment to the government, eg directors remuneration, acquisitions etc, then the guarantee agreement with the private sector shareholders could include provision for assigning the voting rights on these to the Treasury (or the hodling company for these investments that it has set up). The main issue, though, is thst Treasury is further reomoved from day-to-day operations of Lloyds under an arrangement such as this.
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So what you are saying that the investors are as clueless as the bankers or is it just a case of the short sellers striking again?
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I disagree completely with your opening presumption. Why should it be strange that investors find it difficult to believe the chairman and CEO of Barclays? Collectively, the banks on both sides of the Atlantic have spent the past 18 months fudging the issue of how bad things are on their books. Hence the demise of Citi, Bank of America, RBS, HBOS, etc. So why should any investor suddently think that the Barclays crowd are telling the truth. This is the problem Robert. Some investors simply don't believe bankers anymore, whatever they have to say. Equally, given the Arthur Anderson/Enron fiasco, what makes you so sure that all auditors are to be believed? Who was auditing the banks over the past three years? It may not be fair, but I've reached the stage where the government, banks and auditors plus financial regulators are a bunch of idiots who are all driving the UK to bankruptcy. Iceland - you are not alone!
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As a Lloyds shareholder the fact that the Chairman of Lloyds is a friend of G Brown is no reason to wreck shareholder value by taking on the basket case of HBOS. Eric Daniels kept well away from the excesses of sub prime then promptly dumps a totally unknown debt machine on us. I have lost 95% of my share value with only further disasters ahead.
Taking on Northern Rock quickly was probably feasable but HBOS is a shipwreck and Mr Hornby still seems to be employed. Why? The next shareholder meeting should be very unpleasant the CEO.
Had Daniels stayed away he could no doubt have picked up bits of HBOS and RBS if it wanted at knockdown prices but only when it knew the facts. These people should be sacked with no pay off.
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As far as Barclays was concerned share prices fell because of the lack of confidence at the twin shock announcements by this government of having to refinance the banks (plural) and the reintroduction of short selling both at the same time.
A PR disaster. Someone should be sacked for that.
The merger of Lloyds and HBOS is highly regrettable for the longterm as bad debts of both commercial and domestic mortgages of the Halifax could eventually push them down the same route as RBS.
It would have been much more beneficial to have at least two independent Banks.
Then they could have cherry picked the good business and left the rest for the government to sort out.
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"As for Lloyds, I'm hearing that it may yet follow the lead of Royal Bank of Scotland by converting £4bn of preference shares held by the government into ordinary shares."
So Robert, How come Victor Blanc wrote to all Lloyds shareholders only last Friday saying it was their clear intention to redeem the preference shares in 2009? Are we to believe him or you?
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This comment was removed because the moderators found it broke the House Rules.
Banking relies on confidence. Therefore a bank is fine provided everyone believes it is fine. If they do not take this view then it becomes a self-fulfilling prophecy that the bank will need bailing out.
The expressions of sound liquidity have become rather like the appeals of people for missing relatives on TV. Most often it turns out that they are the villains.
Haven't we had just such confident statements from other banks recently, just shortly before they went to the wall?
A good test of the banks' value is what you would pay for the shares if they were not limited companies - ie if the shareholders were liable for all the company's debts.
How much would you pay to be a shareholder, or rather how much would they have to pay you to become one. For myself I would not take the shares at any price if they were offered, and nor should the taxpayer.
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This is another excellent article, Robert!
Is 'nationalising' an empty word though, I wonder, when it's about ensuring shareholders' income?
How many taxpayers (and if so, which ones?) benefit from any equity in UKFI, whether it originates from Lloyds, Barclays or Northern Rock?
What if every British citizen became a shareholder in UK plc instead? Then shareholder values might have some 'national' meaning at least!
Yours with continued admiration for putting the finger on the debt-buttons,
Sabine
Organiser, Forum for Stable Currencies
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As you say, Robert the penny has finally dropped....
Is this day when we see the return of listening to the facts rather than hysteria ?
I hope so
All we need now is for GB and AD to avoid messing things up with yet another announcement. The government should keep quiet
Here's to the future.....
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As a member of Barclays Staff, can I just say it's great that the wider Financial world has woken up to the fact that we are actually doing ok - I can also say that I have profited from the slump in share prices, as a humble branch cashier, I removed my £500 savings from a well known Building Society on Thursday and bought Barclays shares at £0.48p on Friday, I've already almost doubled my money - makes up for the lack of bonus or payrise this year and also continues to show faith in the company I work for!
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I'm glad I dumped my bank shares
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I'm sorry to say I would not trust anything said by the regulators or current crop of Bank Directors.
Two days before Bradford and Bingley were Nationalized its Directors were saying it was fully funded well into next year.
Shares at the moment are too dodgy for ordinary folk.
Barmy bounce under way in the good old US of A.
But how long will that last ?
Until a new wave of Investors have been fleeced and then it will be doom and gloom in the news again !
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Finally the penny is dropping!
Lemmings we go up now!
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And the Housebuilders haven't started failing yet.
Bearing in mind higher unemployment and falling salaries.
Their debts will drag them under.
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At last. Some sense surrounding Barclays' share price. Given that they have confirmed they are not seeking further funds, either privately or from the state, what value would you place on their shares? I feel they would be fairly priced at a £3.20 ..... so currently a good buying opportunity....... if anyone's got any cash.
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A bank that seems to be solvent!!!!!!!!
Someone catch it, stuff it and put it on display at the British Museum.......
On 2nd thoughts it did need to raise 7 billion in panic funding (sorry Private Funding).......
........ never-the-less solvent and with a share price moving from 90% down on the same time last year to just 82% down, this is a success story nowadays ....
PS - I'd be interested to know who within Barclays has written down 8 billlion - could they not be lent to the Gov to estmate the losses other Banks may have.....
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Investors, many American our trying to use the media to trade of the volatility they are injecting into the Barcalsys share price. The FSA should show better stewardship so that one of the best capitalised banks in the world being sabotaged by these so called investors. I would not be surprised if Barcap ends the year in the £3-4 range!
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Hopefully a bunch of shortsellers have been caught with their trousers down!!
Just a shame Barclays won't to a Volkswagen!
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Oh well if the word of the Auditors and City Watchdog say Barclays are doing ok - oh please!!! This is a last ditch attempt to counteract the public demand to stop wasting taxpayers money on insurance which will effectively giving them carte blanche to take risks.
If these banks are really doing OK, in accordance with the words of the Auditors and City Watchdog then lets cancel all bailout packages and use the money to save jobs and homes.
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"Only belatedly have investors realised that Barclays could not make such confident statements without the approval of its auditors and also that of the City watchdog, the Financial Services Authority - and that surely they can't all be wrong."
Tongue firmly planted in in cheek I trust.
We can rely on the fact that because Barclays has had no truck with any weapons of mass financial destruction that it can be confident in the value of its assets. Or can we? This onlooker was under the impression that a key problem is that banks do not know what toxic debt, or from their side of the books, toxic assets and toxic collateral are worth and we are not sure whether they hold them.
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Has the BBC made the moderators redundant but not told anyone?
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Were not Barclays involved in buying and selling of SIV's etc ?
Are they not exposed to the Bond market ?
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is anyone on the moderation team working today?????
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"Barclays says it's profitable"
Yep, we should believe everything the banks tell us.
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RP,
it seems we have had a similar blog lately "don't blame the speculators, IMO lets do,it is not investor realising the true value of Barclays, the problems have been, and still is, speculation on short term price movements.
More importantly though does it really make so much difference if Lloyds is 49% or 51% government owned?
Surely the level of regulation and openess the banks should liable to, makes minor change in the % owned by the goverrment accademic?
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Now I don't know much about shares - but I was under the impression that both types of shares had pros and cons and that preference shares were non-voting but they paid a guaranteed dividend - so isn't Lloyds basically trying to pull a fast one by swapping non-voting shares which pay a dividend to non-voting shares that don't pay a dividend?
So where exactly is the benefit to the government and the tax payer?
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Mr Peston re your comment
Lloyds converting preference to ordinary.
Considering the letter sent out by Lloyds at end of last week stating intention to buy back all preference shares during 2009 and resume dividends doesn't your comment smack at either sensationalism or even self aggrandisement by presuming to have great insider knowledge.
It seems to me that "Off the cuff Throwaway remarks" such as this is one is part of the cause for shares being in a see saw situation. Let's have some consideration towards people such as me who are caught in a nightmare of a trap. I have puchased lloyds shares in bits and bobs since they were first privatised. The intention was a) Either to sell at 65yrs old and buy an annuity or b) Sell some and use divi to supplement pension. Standing on over 15,000 shares I cannot do anything but hang on in hopes. Your headlines continually give me the shivers and worries
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Unfortunately Mr Peston as a shareholder I was told by Fred that RBS was in reasonable nick and they wanted the rights issue to beef up their reserves. Would you believe a major bank CEO at this time? No they have broken the trust between the company officers and shareholders.
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Varley and Turner should put some collateral behind their statements. Then there could be no doubt. What about a personal guarantee of 1 million each against there being any solvency issues at the bank?
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one hour and fifty minutes and still no moderation.
What is going on?
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In the words of that very well known advert perhaps it's now time to 'calm down dear'!
Over the months I have watched with amazement and sometimes deep frustration at the sensationalist style of reporting which seems to have prevailed throughout this whole sorry financial saga.
Maybe I'm just getting old, cynical and meldrewish but I expect a little more dignity and objectivity from the BBC.
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not putting any money on this - but I think the moderator may have walked out!
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If this open letter had not produced a significant bounce in the share price (as appeared might be the case at one point) then it would have been a statement that investors did not believe ANYTHING that the banks said. After all, Barclays couldn't be much more explicit than this. It would have shown a complete absence of trust and without some trust in the statements of companies, investment cannot really take place.
Thank goodness therefore that there WAS a share bounce. Barclays had better deliver on everything they have promised though, or I think levels of trust in the city will reach new and frankly hideous lows!
http://thedailycrazy.wordpress.com to give your views on which - if any - industries offer the UK a way out of the current recession.
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What is worrying about this article is that it simply confirms that much of of what goes on in the city and the information used by the people working there (in the stock markets and financial markets) is based largely on "chinese whispers" and these people have little or no proper knowledge understanding of how, in the real world, these businesses operate.
In the case of Barclay's the traders and finacial insitutions should be questioned as to why they decided to mark down the share prices so aggresively and if their answers are questionable then they should lose their licence to operate.
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So, Barclays finally convinced the markets that they (perhaps only they!!) were better prepared for what is to come without so much government help/interference!
An old adage . . . only the strong survive!
Barclays have taken from Gordy what was to their advantage, and quietly told him to sod off with what was not!
Perhaps we would all have been better of with the few survivors like Barclays and let the "sick, lame, lazy" like Lloyds and RBS join all the other "midland bankers" of history.
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Barclays up 66%
Lloyds up 33%
RBS up 20%
the race is not for the swift but who can endure
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No. 3 Good point
How surprising that today moderation takes so long
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3. BasaltRocky:
"....... try turning to the BBC's other Economics Editor's blog (Paul Mason who is the BBC's Newsnight Economics Editor)".
Agree absolutely - Paul Mason's bog is the best economics/business forum on the BBC by far, and his most recent piece was particularly excellent.
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are people who speculate against the pound no more than city traitors.
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At last some sense prevailing and the short sellers rumour mongering ignored, although they are still trying - note all the doubting comments posted after the article in The Times today.
I hope they are well and truly burned as they have burned our pension funds and small shareholders, including all those now desparate people who through SAYE have their life savings in these banks' shares.
I understand there are 3 million small shareholders in RBS, Lloyds and Barclays, a lot of voters Mr Brown, Darling and McFall of the looney left (to think I used to vote Labour).
A big distinction between today's announcement and those of RBS, HBOS and BB before their rights issues is that then the management were trying to raise money and making reassuring comments which turned out to be unwarranted.
Now auditors/advisers are very much more cautious and Barclays are not trying to con money out of shareholders-quite the opposite declaring they do not need new funds.
Barclays' gross write downs are also comparable with RBS'.
If Blank is seriously thinking of converting the prefs he better make the new shares non voting, otherwise his reputation will take a battering and confidence in Lloyds will drop.
To destroy a bank's shareholder value (the original Lloyds) because of his friendship with Brown will put him on a similar footing as Goodwin in reputational stakes.
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Robert,
tying up two news items.
Do any of the Lords sit on boards of banks or financial institutions?
Is it possible to discover if they laid down amendments on any of Crash's financial instruments of law?
If so maybe Crash can blame them for the lax regulation that may have ultimately led to the meltdown of the banking system.
Moderator's are on a go slow too.
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chriss-w wrote:
If the banks are, after all, in reasonably good nick then why are they no doing what the Government is asking of them and lending to all and sundry?
Because all and sundry won't be able to pay it back. Because lending to all and sundry is what got them and all of us into this mess in the first place. Because it is madness to lend against overvalued and depreciating collateral.
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Shouldn't be too difficult, given Sir Philip Hampton has a copious supply of hats. As Chairman of RBS, he only has to persuade himself, as Chairman of UK Financial Investments, to request the FSA not to get involved, in accordance with the provisions of the Hampton Report as enacted in the Regulatory Enforcement qnd Sanctions Act 2008. And then maybe he'll buy himself some nibbles from Sainsburys...
WS Gilbert dreamed something not dissimilar up in the Mikado. Well, we've now got a crude idea who the Mikado and Second Trombone are, quite apart from Katisha and the Lord High Executioner...
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Why would the lloyds group wish to lose control of their destiny by taking this action ?
They have already signalled an intention pre merger, to repay the preference shares as soon as possible.
Why give up control of the company to the Government to save just 500m p.a. when they may be able to do this from their own resources at some stage in the not too distant future.
Ignore any current debt issues/ concerns and the individual profit figures of both organisations amounted to about 12 billion. I am not suggesting that is what will be expected in the combined first few years of trading given the HBOS debt position but they have already estimated cost savings of 1.5 m through the merger over the next 2/3 years.
Also there may be some bits of the enlarged group that do not fit in to the future working plans of the group they may have a value and can be sold in order to raise cash to repay those preference shares.
Once again our esteemed journo has dragged out another banking story no doubt from his "sources". Wish he would leave banking topics alone for a while as he is developing into a one trick pony, but then again maybe his leaking sources are after all, to be found somewhere in the treasury.
That may have an impact in the current judicial review over the Northern Rock shareholders. Read the transcript of the attempted defence by the Government and where those particular leaks, may or may not have come from. It begs many a question on the truth telling issue of the source of the leak at that time. I rather suspect it was not the "company" or their advisors as suggested by the Government counsel
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Well, TB did, didn't he?
I actually had the RCs asking me for consultancy not long afterwards, how to avoid dawn raids. I couldn't help being bemused at the thought there was the worlds' oldest organisation after that kind of help...and whether there was insider dealing going on - and when to expect the Spanish Inquisition.
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I notice that manufacturing industry does not seem to be getting the same priority help from the Government (taxpayer) as the banks did. I think we'd all agree that the unsustainable 'bubble' created by banks and their like is at the base of all the trouble the British economy is now in. I don't see how we are going to get out of the current 'bust' without supporting manufacturing industry and forgetting the very much discredited idea that the British economy could exist with just financial services and the 'service economy'. I for one would rather give money to support real industry, instead of the fake economy created by the financial sector. Government, please take note and act promptly to avoid manufacturing industry virtually disappearing, as it did in the 80s with Thatcherism.
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So, the fear created by the expert analyst short-sellers was unfounded.........
But by stirring the market up they created the rush which drove them down....
and now, they're way back up.
Very clever and extremely underhand.
Good con....and legal too.
Come on GB, sort it out .
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Health secretary Alan Johnson's concerns about the NHS in the recession have been leaked in an email from the chair of NHS South East Coast.
http://www.hsj.co.uk/news/2009/01/leak_reveals_alan_johnsons_pfi_concerns.html
This concerns primarily the availability of funds from private sector banks to fund major public sector capital projects.
Perhaps a more fundamental issue arising from the creeping nationalisation of the UK banks is that the PFI/PPP model might have run its course. After all, who is standing behind the banks, to whom the risk, so far as the public sector is concerned, might ultimately be transferred?
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"The board fully support the manager, there will be no question of a change of leadership at this club".........."Barclays do not........"
Buy at your peril! Barclays, like th eothers, are a complete set of bankers.
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#18. CityGirl67
Having recently visited various banks at local branches and found Barclays service to be far superior I could not understand that their fall was so severe.
Unfortunately I didn't get in quick enough.
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Say no more.
Nudge Nudge Wink wink.
Where have you heard this?
"To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service."
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A truly scandalous puff-piece:
"Barclays could not make such confident statements without the approval of its auditors and also that of the City watchdog, the Financial Services Authority - and that surely they can't all be wrong."
What planet are you on? They've all been wrong so far.
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B&B,RBS,HBOS and all the others said the same...
"we are a well funded and profitable company''.
If Barclays does go pear shaped, on Wednesday, we must be at about Nov.1st 1929...
''...and now on behalf of the 'UK Bankers Bonus Appeal Fund', a short message from the BBC...'
''Get stuffed''.
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So the chairman of Barclays has soothed the market with ancient history.
I wonder what his predictions are for this current year's profits?
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Fear not ! We are saved !
MacDonalds are opening another 1,000 branches
Respite Big Merv, quantitive easing is no longer required
(not in the monetary sense anyway)
We shall use burgers for currency !
The London Sauce Exchange will do you a Barclays share per burger
or if you're a tad boracic, two RBS shares for a bite
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Robert, have you been talking to Stephanie today? Seems strange to see 2 pieces, both saying that our banks are OK.
So all the analysis of toxic debt and over -exposure was just fluff? There isn't a financial meltdown going on? The flow of money bank to bank is just in fine shape is it? Did I just dream that the US's biggest banks failed?
methinks you might be joining the Blue Sky Ostrich Club
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What Lloyds are saying is they would like to be allowed to keep those billions of pounds of taxpayers' money without repaying it. Conversion of preferred to common is exactly that.
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So the banking situation is stabilising is it, or is it just a chance to have a brief look at what remains within the still smoking wreckage that was the banking industry, afternoon tea lets say, just before the wave of unemployment and corporate failures reverberates back down on them in about 6 to 12 months and they have to revise all their figures...again.
Enjoy the break everyone.
I could be wrong of course.
Jericoa.
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If indeed there has been an attempt to short sell Barclays shares, was wondering if similar rules exist to prevent potential collusion between those shorting as presumably exist to prevent upward market manipulation? I refer you particularily to the recent documentary about porsche, volkswagon which inadvertantly seemed to suggest there might have been communication between hedgefund managers.
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I am a novice stockbroker who has only been purchasing and selling shares during the last 3 months and I have been very puzzled by the continued negative comments about Barclays Bank, despite them advising that their balance sheet was sound.
Your comments today "It's slightly odd that the penny should at last have dropped for investors" are most welcome but I do wonder why you have not made them earlier. It appears that the penny has only just dropped with you too yet a novice like me has been asking this question continuously over the last few days.
I would welcome your comments on why they have received such bad press recently -could this be because of short selling perhaps? Your comments on this subject may prove valueable
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15 wykhamist
Your second para was a bit of an ouch. lol
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You seem to think that banks should be trusted, but there ihas been ample evidence to the contrary over recent months. That is exactly the problem. I was asked by Bradford and Bingley for more money on a rights issue. If I had believed them and given them money I would be even more out of pocket than I am. Also, how many auditors can be trusted who signed off all the banks accounts as satisfactory before it became obvious much of the assets were toxic and worthless.
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It seems pointless to be trying to debate with a three hour time lag.
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On 16 January, Barclays made the public statement that, after all costs, impairments and market valuations they expected to report profits over £5.3 bn - about the same as the ordinary share capitalisation. If it subsequently turned out that this was not true, and that the directors knew it, they would have gone to jail.
This was not enough to stop all the world and his wife who spent most of last week talking Barclay's down - the Government, so called City analysts and the financial press, who were in little short of a frenzy, and for all practical purposes calling John Varley a liar.
As a result, small shareholders have nearly been wiped out, ordinary bank employees have been impoverished and beleagured pension funds have been hammered again by a bunch of muppets (and this includes the Government) who think that they know better than the directors what Barclays financial situation is.
Today, Barclays have expanded on their 16 Jaunuary statement and, as even Robert Peston has to admit "Barclays could not make such confident statements without the approval of its auditors and also that of the City watchdog, the Financial Services Authority".
Even now, some people (like #10) are still saying that "So why should any investor suddently think that the Barclays crowd are telling the truth". The answer is that they have to and I'd rather have Marcus Agius and John Varley in my lifeboat than Gordon Brown and Alastair Darling.
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If Barclays are so profitable why did they need to raise £7 bn last November?
Barclays are only telling us what they want us to know eg assets - what assets do they actually own which are going up in value, not down?
Where's the beef?
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36. At 4:46pm on 26 Jan 2009, Venachar01 wrote:
Unfortunately Mr Peston as a shareholder I was told by Fred that RBS was in reasonable nick and they wanted the rights issue to beef up their reserves. Would you believe a major bank CEO at this time? No they have broken the trust between the company officers and shareholders.
To which I say
Well that's because the lazy press that anyone labelled banker is bad news through generalistic lazy reporting and convincing people like you, that if one is bad they are all bad, without really getting to the facts of every position
It's an easy term to sell and grab a headline, but get journo's to explain what they mean beyond the headline, is beyond most of them.
Same goes for the word politician ..... a few bad eggs and they are all on the take .... the house of Lords will now suffer the same treatment and will be pilloried from pillar to post, even those that do a job diligently and to the best of their ability.
Watch the headlines in the next few weeks and see.
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Come on Robert we are 'officially' 6 months into a recession (more like over a year IMHO) and still not a single bit of criticism of Brown & co
The world will not collapse you know, we can take it
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This comment was removed because the moderators found it broke the House Rules.
Barclays chairman, the FSA and the auditors assure everybody that Barclays is sound as a pound
RBS chairman and auditors did the same (FSA nowhere to be seen) and then went belly up
I don't agree with Robert's analysis of Barclays and I would not touch their shares with a barge pole
If Barclays are making such huge profits why did they need to raise £7bn - Barclays are hoping the tide will turn before they have to admit to a huge black hole in their accounts
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OK Robert, you keep talking about getting the banks lending again so how about this, reported elsewhere on teh BBC web-site
Pfizer announces a $68bn takeover of Wyeth of which $22.5 bn is to be raised from the banks
This the sort of thing you had in mind?
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Its becoming apparent to me and I suspect many others that there is a deliberate policy by TPTB, of not allowing posts on this blog to be moderated in a timely fashion.
That way TPTB hope people will get bored and go off and find other things to occupy their minds.... like watching reality tv or the latest celeb chef.
Come moderators wake up, there are lots of free thinking people here waiting to express themselves!
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Now its a 3 hour delay to moderate.
Perhaps some ex steel workers could be taken on to clear the backlog.
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I think it would be a good idea if people would read the annual report of the banks. And no I am not even suggesting to look at the numbers now but could it be a coicidence that a bank (Barclays) placing risk management at the core of it business is doing better than a bank who is not (RBS)? Barclars has been calculating Economic Profit, which a measure of value creation adjusted for risk, for years whereas the like of RBS did not...maybe there is a thought...
Oh what did I say, read, think? Nah it seems it might be a stretch for many people here!
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47. investinbob wrote:
"are people who speculate against the pound no more than city traitors"
Define "speculate"
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The triangle between the public, the public servants and the financiers is thicken with distrust, arrogance, contempt, deceptions, and spins.
What would Rothchild and Buffett have demanded from the banks ???
Is it possible the banks/bankers have been setup, big time, and then used as scape goats to distract from some hidden agenda ??
Control of military, media and money were always the most urgent primary objectives in past coups around the world.
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55. spiesisu wrote:
"So, the fear created by the expert analyst short-sellers was unfounded.........But by stirring the market up they created the rush which drove them down....and now, they're way back up.
Very clever and extremely underhand.
Good con....and legal too.
Come on GB, sort it out ."
Please don't ever let the facts get in the way of a good conspiracy.
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Seems like a good deal for Lloyds if it means they save £500m in preference share interest.
Victor Blank said in a letter to shareholders last week that the Bank intended to pay off the Preference shares in 2009 anyway and so if that proves true then any increase in the Government's shareholding will be short lived.
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The whole financial industry is discredited; so why do the BBC quote obscure investors who say that the pound is finished?
Perhaps Standard and Poor have a view on this - and what is that worth?
You can see that the markets have no idea about banks - despite the quotes in the media about Barclays, from the markets.
When are you guys going to wise up that these clowns know nothing; have made money by betting and their opinions are worth nothing.
IMHO any reputable media organisation would be trying to put a balanced reporting face on - instead of the daft spin that the BBC rolls out.
Stop trying to pull a story and try to step back and take a balanced view. The world isn't coming to an end, the hysteria about the current situation is fuelled by the media (and we pay for the BBC to do damage); ok we are going to have a change - let's get on with it without the media (BBC) doing even more damage.
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Brill idea from Lloyds, we bail them out, pay them the money and have NO voting rights on the shares we get.
These city bankers must think we were born yesterday. MUGS
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This man is a national disgrace. He revels in doom and gloom and acts as if he is the only man in the country to know the real facts.
The truth is - he has contributed in a big way to the nation's depression. Please remove his sneering face from our screens and his self-righteous blog from the internet.
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Thanks to advice of forum members bought into Barclays at 51p on Friday. (Not a great number of shares btw) and I expect them to go to about 120p.
They deserved to go down, but not by that much. The lame banks are a different matter and deserve of their market valuation.
Needless to say once I sell, I shall be shorting the market and driving them back down again only to buy in again as the mugs once again realise my tactics panicked them. :)
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Post 60
Can not agree more, over a period of less than six months the whole finance sector, and the regulators have turned over a new leaf. A bit like saying that 100% of convicted criminals will get out of jail and not re-offend, it is a well known fact that many criminals perfect their trade in prison and become more proficient at crime when they get out. Using this as a poor ? comparative to the finance sector, can we really believe what they are saying.
Also agree with post 55, short selling scam or what ?.
I must urge people to watch, on iplayer, the program detailing the great stock exchange crash of the 1930`s. A real eye opener to what has gone on over many years and recent months.
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#37 - nice idea, but there is something called a 'closed period' - when company directors are not allowed to deal in shares in their companies in the period leading up to announcement of results - this is due to them have access to financial info ahead of public announcements (insider trading)
interesting though, Varley, Diamond, Seegers et al did invest quite a lot in late 2007 (i think it was a couple of mil each) to show confidence and try to prop up the Barclays share price when they were going for ABN - i think they paid about £7 a share at the time!
I guess they may have written off that personal investment, but at least they still have their jobs though which would not have happened if that little deal had gone through!
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#71 sosraboc wrote: "It seems pointless to be trying to debate with a three hour time lag."
As others have pointed out, it may be deliberate editorial policy. A lot of ground can be covered in a debate spanning 500 comments with prompt moderation, especially as a few contributors have a clue, but if the output is unfavourable, a time delay will reduce it to a mere hundred simple yays or nays.
What is this article meant to accomplish anyway, a bridge loan of PR?
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All this pessimistic talk, tantamount to treason, according to Gordon Brown anyway. It may be true that we can not trust bankers or politicains as far as we can throw them, but this would always have been the case. We should not say so, however, or the economic collapse will be blamed on our "negative vibes", and not government and banking leaders who either a) did not see this coming (incompetent) or b) did see it coming but did not act in the national interest (incompetent villains). Unless c) they did see it coming and did act in the national interest and it could have been a whole lot worse (unconvincing incompetent villains).
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#92 Hi again
Anyway this isn't really the story of the day.
Two more are more worthy:
(1) massive lay offs worldwide
and
(2) Lords taking brown envelopes.
Time to stop blogging, time for marching on Westminister and the corrupt House of Lords!!!
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Contrary to received wisdom, people cannot talk themselves into a recession. They can only talk themselves into looking stupid as the facts plainly contradict them. So what do the facts say? Is there a recession or not?
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42. godfreybrown
"...In the case of Barclay's the traders and finacial insitutions should be questioned as to why they decided to mark down the share prices so aggresively and if their answers are questionable then they should lose their licence to operate."
If their view of the share price was thought to be so wrong, it would have resulted in a tidal wave of buying. This hasn't happened. Today's bounce in Barclays recovers about half of last week's losses, I think.
Come to think of it, Godfrey, if the traders have got it so wrong and you, without the benefit of 20/20 hindsight knew Barclays was so undervalued, why didn't you pile in and "fill your boots"? You could then come on here and tell us how smart you were at the City traders' expense.
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#95
The facts say that things are very bad indeed,
But then we are classed as "doom and gloom merchants".
Wasn't this situation clear back in the Autumn??? It was to me.
Recession, Depression, Economic collapse, call it what you want but I've never seen anything like this before. It's DIRE!
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Hi,
I work for Barclays and i dont understand the criticism that Barclays is getting - a bank that has managed it assets well, continued to grow in tough market conditions and above all made a substantial profit should be respected- yet apparently this is not good enough!
It is not Barclays fault that its competitors took their customers money and flushed it down the drain, just because some banks behaved badly - and should be punished severly - does not mean Barclays should too.
And Barclays did not raise £7bn because they needed to - it was ordered too by the government to restore stability to the financial system and the huge losses of other banks.
We should be happy that barclays has managed to avoid the losses of RBS and Lloyds - yet all i hear is how badly EVERY bank has done - which is not true.
So when passing judgement look at what banks have done the real damage and then look at the banks that have done what they should - manage assets and make money so that it can be reinvested into the economy.
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The Chairman of LLoyds Banking Group wrote to shareholders on 22 Jan stating that they intend to repay the Government's preference shares in 2009. If this is true its not likely that they will also be asking for more finance. The sooner they issue their audited accounts the better it should help deal with all the rumours.
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People seem have expectations of auditors. As I understand it they do not have any responsibility to shareholders. I seem to remember there was a judgement sometime ago. They are paid by the company and presumably have some liability to the Board or Directors but their contract of appointment usually has too many disclaimers.
Maybe someone more knowledgeable could enlighten us. All that comes into my mind when I think of auditors is rather expensive chocolate teapots and ashtrays on motorcycles.
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18. CityGirl67 wrote:
"As a member of Barclays Staff, can I just say it's great that the wider Financial world has woken up to the fact that we are actually doing ok"
98. NukemDukem wrote:
"I work for Barclays and i dont understand the criticism that Barclays is getting - a bank that has managed it assets well, continued to grow in tough market conditions and above all made a substantial profit should be respected"
===============
OK, for those who maintain doubts about the value of banks' senior management utterances (and I'm still leaning to that group), I think these two posts are interesting. I'm not aware of any similar posts from Lloyds/HBoS etc staff saying anything similar about their own banks!
So should we give Varley a break? Actually, I don't agree with RP that "they've been shouting they're in reasonable nick for 10 days". Varley's statement today marks a clear break with the past, I think, providing much more material information than he did 10 days ago.
We now know that Barclays' profits will be between GBP 5.3 billion and GBP 6.2 billion. The latter was their profit last year (adjusted for one-off items). Varley did not say they'd beat it, which means they won't.
We now know Barclays is taking GBP 8 billion in loss provisions, a number he did not release in his trading statement of 16 January. That's comparable with RBoS, but there isn't the additional GBP 20 billion write off on ABN Amro that RBoS has. Oh how happy Varley must be he lost that takeover battle.
The 16 January announcement was interpreted as meaning that Barclays was taking lower provisions than other banks. We now know this isn't the case, well not to any material extent anyway.
We know Barclays has a GBP 17 billion regulatory capital surplus. Again, we didn't know that 10 days ago. It ought to keep them going for a while, especially as the underlying business appears to be very profitable. We know that from the statement that Barclays had record revenue numbers for 2008, another new disclosure, and that 2009 "has started well", not that I'd extrapolate the last 48 weeks of the year from the first 4.
Now maybe the question is why have Lloyds and RBoS risen in tandem with Barclays?
Incidentally, I don't work for Barclays nor am I a shareholder!
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Barclays is the ultimate dead cat.
It died a few months ago and has been falling ever since.
Fortunately for some, it landed in the Middle East and took a larger than average bounce.
Where will it land next, and will it bounce are the questions we should be asking.
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100. OldNick666
Actually, I think auditors do have a duty to shareholders, though the limit of that duty is fairly narrow. Basically, audited financials cannot be used for any purpose other than the one they were produced for (ie a report of stewardship over ther previous year), without the auditors agreeing to such use.
Expectations of auditors are unrealistic. It's all well and good saying they should spot valuation "errors" made by banks, but has anyone asserting that ever thought about how they'd do it?
Most of the "toxic waste" on banks' balance sheets comprises financial instruments created by investment banks. Each instrument is unique (ie a different package of loans). The only source of pricing is the counterparty to the loan, ie the investment bank that created the loan and sold it to the investor, as only they know precisely what assets are backing each issue of securities. Of course, it's possible to model the prices of these things, but those models are based on the performance of lots of similar packages of loans created by the investment banks and sold on. If, as we have now, all these packages are difficult to sell, then the models just confirm the counterparty's view that they're not worth very much.
The idea that the auditors somehow have some magical source of prices denied to the rest of us is nice but, unfortunately, the stuff of dreams. If banks make an error in pricing a security, eg simply use the price of security A to value security B, I think there's a reasonable hope that it will be picked up well before the audit! But the idea that auditors are somehow better qualified to value difficult-to-price securities such as asset backed bonds is, I'm afraid, a delusion.
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#103. JayPee28bpr
Thanks for the info.
People are rather asking the banks to look into a guaranteed crystal ball to value their debts. These actually only become toxic when actual default takes place. If someone can accurately predict levels of unemployment at a future date they may be able to start predicting which mortgages will turn toxic.
Add a level of complexity and the valuation becomes more difficult.
Add in share prices and currency exchange rates and the problem becomes intractable.
Hold tight. The driver of our bus has no map and is partially sighted.
We live in interesting times. (I think this alludes to a Chinese curse.)
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Oops. No offence to the disabled intended.
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Taken from a recent independent auditors statement I received...
"our responsibility is to express an opinion on these financial statements based on our audits"
"those standards require that we plan and perform the audit to obtain reasonable reassurance about whether the financial statements are free of material misstatement"
"An audit includes examining, on a test basis , evidence supporting the amounts and disclosures in the financial statements"
"an audit also includes assessing the accounting principles used and significant estimates made by management"
I'd hope that might involve asking
'how have you put a value on goodwill?'
'how have you valued these assets?'
Shareholders and investors have to rely on independent auditors to assess whether the financial position stated are free of material misstatement. What other 'independent' review is there.
Someone, in another blog said that it was important to change people at the top. Likewise, I think it important to change auditors from time to time. There should also be no conflict of interest such as previous employment by your auditor for chief execs or finance directors.
I think that if familiarity does not breed contempt, it at the very least reduces independence.
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I think that the banks 'news' stories are irrelevant now, Gordon bailed them out ‘fair enough’ you may say as they are a central utility to the economy however consider this.
1. Why are the exec’s of these banks not being interrogated?
2. Where are the FSA in all this mess? What purpose does this organisation serve?
3. Where is an appropriate stimulus package that will get Britain moving forward?
4. Leading on from 3, Gordon’s calls for avoidance of protectionism appear to have fallen on deaf ears in the states – I believe this puts us in a VERY bad situation (Good to see the ‘special relationship’ working ONE WAY again!)
5. Gordon’s printing of money is an effective default on our sovereign debt’s surely this is a sign of protectionism from Mr Brown?
I thoroughly believe that our country is on the precipice of a cliff, we have NOT invested in anything tangible in the last decade. Brown is pulling all the levers folks, but the good ship UKI plc is still headed for the rocks!
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Is this 'war propaganda', put out by government and banking officials to deny any casualties
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#103
It doesn't matter how difficult it is to value the underlying assets of a bank.
If an auditor is unable to do so, and these impossible-to-value assets are material, he should qualify the accounts - period.
So have the auditors been signing off the accounts incorrectly so as not to upset the banks' bosses and risk losing the audit and associated massive fee income?
Of course the wouldn't do that......................
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Steer well clear of Barclays and other banking shares.
The hedge funds are greedy hyenas and having licked the carcasses of these companies, and found them so deliciously profitable, will be back.
The problem is that no-one truly knows what losses the banks have tucked away.
Do the banks?
The first big wave of economic disaster hit the financial sector.
The next big wave is hitting industry, which has borrowed heavily from the financial sector.
How many of the loans which the banks currently and confidently think are OK will turn out to be bad debts?
We don't know.
The best thing to do with any spare cash is keep it in the Post Office.
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The banks are liars.
Sell Bank shares and protect yourself.
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Dear Bloggers
"Can some one elaborate on Gordon Browns "new world order speech"
this smacks of a regime that has been consigned to the History books"?
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What is there to say? He is losing touch with reality.
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#112 re GB's new world order....
The economic crisis should be treated as "the difficult birth-pangs of a new global order", with new rules introduced on trade, Gordon Brown says.
The prime minister set out a series of actions designed to "replace fear with confidence" and warned against just "muddling through as pessimists". .......... http://newsvote.bbc.co.uk/2/hi/uk_news/politics/7850649.stm
The man is in denial.......nothing he has done (or suggested as he announces many actions but few are actually implemented) has worked.
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Nationalise the lot of them. As the Northern Rock fiasco showed,it was only when people knew that the bank was being run properly in government hands that money and confidence returned. I have my accounts and savings with RBS and the only reason I still do is that the government own most of it now and I can be assured that it reasonably safe.
'Private enterprise' has nearly destroyed the bank system in the UK and does not need to be rewarded or propped up in any way and I feel little sympathy for shareholders or the senior bank staff. They milked the banks for everything they could in the good times and now chickens have come home to roost. That people ignored the warnings about indebtedness and slick financial products is part of the problem,though deregulation has also been seen for the fraud it was.
Governments also should have been far more cautious...when businessmen clamour for something,there is usually a reason...greed! In this case it has led to the present disaster in finance and banking. Never again! Strict regulatory systems must be reinstalled worldwise and these guys obviously need watching like hawks.
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Not suprised, as RBS did very very well out of the conversion and we the tax payer lost a fortune.
Look out for lost of shorts being taken out on LLoyds
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84. Jaypee
We all have our theories.
So far I'm pretty happy with the way I have managed to stay ahead of the game.
I wrote in the front of my company cash book in 1993 '"Next reccession 2008'.
Having picked up the theory way back, it has been fascinating watching the whole thing expand and contract.
All business' have blips, what they don't need are gossip mungers running off and spreading bad news to try and bring them down - or take advantage.
(yeah i know this is the real world)
I remember seeing a good business brought down by the use of CB radio years ago. The company that started the reaction benefitted no-end, the company which was actually extremely competent 'went down' , because suppliers withdrew credit.
Tis all the same in my view.
underhand, even if does wear a shirt and tie.
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#106. mrsbloggs13c2 wrote:
"An audit includes examining, on a test basis , evidence supporting the amounts and disclosures in the financial statements"
What other 'independent' review is there.
#109. yukapataya wrote:
"It doesn't matter how difficult it is to value the underlying assets of a bank.
If an auditor is unable to do so, and these impossible-to-value assets are material, he should qualify the accounts - period."
As an engineer if I were to examine on a "test basis" I would be obliged to firstly understand how these instruments work and then on a sample basis would work through the trail. In the case of a mortgage backed security I would need to look at the mortgage deed and the information provided as a basis for granting this and all of the relevant insurances. I would need to trawl through and understand all of the small print. I would then need to drive past the property and look at the area and thus form an opinion.
Please enlighten me. Do auditors do this for a sufficient sample size?
In reality I do not believe that there is actually an "'independent' review". That is why we are in the current mess.
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What about the truly vast rafts of unpayable personal credit card debt?
There's been relatively little discussion about these.
Jobs are being lost left, right and centre,
How exposed are the banks to these?
To what extent thave they catered for these bad debts?
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104. OldNick666
Also keep in mind the role of rating agencies. People make risk (default/non-performance) assumptions on the basis of their ratings. I think they've rather let us down in all this. If you look at a number of my past posts, you'll see I bang on a lot about conflicts of interest between government, regulators, and regulated. This is another aspect of the crisis where conflicts have played a big part, I suspect. The credit rating agencies get paid fees by those seeking a rating. This has to at least risk skewing their judgement towards over-rating securitised issues. Hence the AAA rating of so many bonds that now look very sick.
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43
I suspect Lloyds TSB would have been even better than Barclays has HBOS not been foisted on them by GB and AD
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103. JayPee28bpr
And adding to 106 and 118
Mostly agree with your posts.
A few additional thoughts
The directors are appointed by the shareholders.
The Directors appoint the auditors and the shareholders vote to approve.
The Directors are supposed to review the choice of auditor annually AND ensure there are no conflicts between auditor supplied consulting services and the audit.
If the auditors could not accurately value a large chunk of the assets there should have at a minimum been a clear note to the accounts and more honestly the accounts should have been qualified to that effect.
Regrettably, no accountancy firm is likely to have the courage to make such a qualification given the financial cost.
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106. mrsbloggs13c2 wrote:
"I think it important to change auditors from time to time"
There's actually a requirement to "rotate" partners in charge of listed company audits at least every five years. That doesn't mean the audit firm must change, but the partner responsible must. You'll also find that on most large or complex audits, there will invariably be a second partner review. And. finally, all the main audit firms have general quality assurance functions to "cold review" the quality of their work.
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One characteristic of a pyramid scheme is when things goes wrong the people above suffers less consequences and milder punishments than those below. Finance and political systems are giant pyramid schemes where everyone is forced into.
We now have decades to study the collapse of communism. It started from within, as always. People just gave up doing and listening. Compulsion by force only confirms suspicions. But it is a natural mass human reactions to totalitarian controls.
To destroy a society, encourage and foster controls, swindles and elitism. Be careful, we have something worth rescuing.
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95 werringtonsilent.
Nicely worded, but incorrect.
We, and by that I mean those with the ability to communicate the fear of a reccession, have been digging away it it for nearly two years.
I have already picked up, where we live, a blatant lie about 2,500 job losses.
Completely untrue, but unless you know, it just increases the fear.
Saying that, I am also well aware that we need downturns, to rectify 'stuff'.
Which is why I planned as well as I could for it.
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109. yukapataya wrote:
"It doesn't matter how difficult it is to value the underlying assets of a bank. If an auditor is unable to do so, and these impossible-to-value assets are material, he should qualify the accounts - period."
I quite agree. However, what's happened with the "toxic" instruments is that the auditors have reviewed the value applied by the banks, and judged them to be reasonable at the time. Actually, they will probably have sought their own prices for many of these instruments. In the sector I know best (mutual funds such as UK OEICs), auditors routinely reprice every security held in a fund's portfolio. However, as I said in # 103, auditors don't have a magical pricing source that we don't. So they'll come up with prices very similar to the ones the banks have used.
It's therefore not the case that auditors CAN'T value these securities. It's simply that, post-audit, the value has changed as a result of many things: worse-than-anticipated delinquencies within securitised issues, rating downgrades, credibility concerns over the ratings generally, general economic conditions etc etc. Auditors cannot, and are not expected, to forecast this kind of stuff.
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110. noninflatable wrote:
"The best thing to do with any spare cash is keep it in the Post Office"
Presumably in their bank which is run by Bank of Ireland, a bank that is struggling to raise EUR 1 billion from shareholders in a rights issue, meaning that the Irish government will have to inject EUR 2.5 billion in order to keep BoI solvent.
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Didn't Barclays dilute their existing Shareholders dramatically when they sold out to the Middle east ?
Why invest in such a Bank ?
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Will Barclays be required to buy back any of the toxic Bonds it has sold ?
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Hmmm. A car works pretty well till a wheel falls off. I wonder why no-one checked the nuts properly.
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Robert Peston have you been told to send a positive message by the government ? maybe because you are now more conscious that your blog is being read by loads of people that will interpret your every word into whether they should run to the bank and withdraw their money or not.
We remember the days of the directors of Bradford and Bingley saying it was strongly capitalised and look what happened to this bank with still no answer to why it was nationalised and yet the other banks saved two weeks later.
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127 Jaypee.
Are you maybe suggesting for B.o.I. see B.o.Iceland ?
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123: Ah, but the Auditors can only read the papers and documents they are given.
If the documents are false then the Auditors do not stand a chance. (See Madoff)
Of course if the compnay has warehouses then the Auditor can go count the stock, but countng stock is rather more difficult with Banks , where all it is all numbers on spreadsheets (much easier to fiddle).
Quite frankly our accountancy profession, the ratings agencies and American Banks in general should hang their heads in shame.
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#100
Article 6 of International Accounting Standards 1 states, "The board of directors...is responsible for the preparation and presentation of its financial statements"
This is the Companies House viewpoint of what the current legal requirement is, as it falls between the stools of various versions of the Companies Act.
Article 33 of the IAS states, "Assets and liabilities should not be offset except when offsetting is required or permitted by another IAS"
Article 35, however, finishes, "The reporting of assets net of valuation allowances...is not offsetting." This implies that hedging a position is offsetable, because it is part of the position and is therefore part of the calculation of the objective valuation of the position in the market: speculative hedging is not, because there is no other substance to relate it to.
There is still, however, an ongoing debate between the IASB and the European Commission over the methodology of accounting for hedging.
#109
There is always a market to price to - or the value is zero.
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#122 If the auditors could not accurately value a large chunk of the assets there should have at a minimum been a clear note to the accounts and more honestly the accounts should have been qualified to that effect.
Regrettably, no accountancy firm is likely to have the courage to make such a qualification given the financial cost.
If this is the case, then what is the point of an aufit? why a
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You may also wish to consider whether Barclays' business ethics are acceptable to you - they aren't exactly the cleanest of hands.
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....why are the shareholders paying vast sums for nothing? Audit companies must be held to account for their practices..........why doesnt someone start a class action against their fraudulent advice?
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#114 jolo13 wrote:
"#112 re GB's new world order....
The economic crisis should be treated as "the difficult birth-pangs of a new global order", with new rules introduced on trade, Gordon Brown says."
More Global. GB cannot open his mouth without saying GLOBAL.
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#126
Yes we know that these assets change in market price but surely the risks should be evaluated on a probabilistic basis.
Maybe underlying value should be examined and tested rather than just looking at the price at which they have changed hands.
When I prepare a business plan I look at worst case - say 5% probability. Likewise best case. I also look at the most likely case.
Oh. I forgot. Most people do not understand probability. Silly me.
Still cannot get accountants and chocolate teapots out of my mind.
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#137 jolo13
I think it has been tried and failed. Maybe someone can remember the case.
Shareholders pay to keep a cosy cartel in place. They have no choice except to ditch their shares.
Dissenters are rejected and the bush telegraph makes sure that they never subsequently get a slice of the tasty action.
The only exception in any organisation I have seen is one of the major engineering institutions.
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Nice to see Fred Goodwin has got over the trauma of losing his RBoS job.
http://news.scotsman.com/topstories/Anger-over-F1-job-plan.4914929.jp
I wonder how many other recently released RBoS staff have been as fortunate as Fred? Still the job he's being touted for is unpaid. Outrageous. I think we need to start a campaign to ensure Fred at least gets minimum wage. I mean how can he survive on just his GBP 8 million pension pot?
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This article is essential reading.
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....The value of our labour that is being expropriated by the government and being gifted to the banks is largely being used to pay overseas depositors - the Asian countries, the oil states, not depositors within our own countries. Money is pouring out of the Western world. This is why, when so much money is being dropped into the banks it seems to disappear as fast as it is dropped in. When the banks are announcing losses, they are not actually 'losing' the money, they are transferring the money to a new place. That place is not within the Western world - or someone somewhere would be recovering from the crisis.
The problem is this. What we are actually witnessing is our own insolvency. We are having to service the debts that we owe to all of the creditor countries, and we just do not have the means to service these obligations. As fast as we are gifting the value of our labour to the banks, the banks are then using that gift to repay our external creditors, but it is just not enough. The government is having to expropriate ever greater value of our labour to keep the repayments going.
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http://cynicuseconomicus.blogspot.com/
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Yes, it is amazing that Barclay's have manage to produce a report so fast and carefully audits by all those concerned, compared with previous issued reports. It is even more amazing that they have HAD TO issue one so early in the first place. Let us all hope that it's details assessment to Joe Public of future risk is as worthy as past reports :-)
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I'm no auditor but I imagine that an annual audit is a bit like the service history and mot on your car, it only tells you that on a particular date whether everything appears to be ok.
It wont tell you what will happen tomorrow which is why you are supposed to do periodic checks to make sure safety and performance have not been compromised.
I don't know when these audits were carried out but the valuations of any assets held (in any form) were probably accurate.
The auditors should probably point out where systems of checks or procedures place are not going to give the whole picture.
The audit is both an internal and external document, a company will use the audit and recommendations contained to make sure that their operating procedures are providing accurate data as to the way the company is performing.
The auditors can't do a lot about determined fraud on the part of the owners which is what happened in the Enron case, the auditors were lied to like everybody else.
I have no doubt that the current Barclays audit contains an accurate reflection of the state of the business at the time the audit was carried out.
However a week is a long time in banking :)
Also posted at
http://www.democraticbritain.tp2p.com/
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Another article today by Mr Hosking, Times banking and finance editor, pointing out the negatives surrounding the Barclays statement, with comments below spreading distrust and uncertainty, thus playing into the shorters' hands, and damaging confidence.
Yesterday's article in The Times by Mr Hosking was also followed by many comments all casting doubt on Barclays - I submitted a early in the day in support of Barclays given its different circumstances to RBS and HBOS (it is not trying to raise capital, quite the opposite, and auditors risk be sued if they get it wrong this time).
Was it published by The Times? - no.
Journalists clearly have an agenda of their own - I wonder what Hosking's is?.
At least Mr Peston publishes both sides of the argument in the comments.
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135
The point of the audit is to give the Directors a bit of a get out of jail card.
Oh cynical me
137
I suspect that once the dust has settled you will see rather a lot of that coming from America.
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139. OldNick666 wrote:
Answers to your points are in CAPITALS for ease of reference. I'm not shouting.
"Yes we know that these assets change in market price but surely the risks should be evaluated on a probabilistic basis."
EFFECTIVELY THEY ARE. THAT'S WHAT THE RATING AGENCIES DO WHEN ASSIGNING A RATING. THIS SHOWS THE PROBABILITY OF DEFAULTS ETC, BASED ON VARIOUS FACTORS.
"Maybe underlying value should be examined and tested rather than just looking at the price at which they have changed hands"
THIS IS THE BASIS OF THE CURRENT DEBATE OVER MARK-TO-MARKET ACCOUNTING. THE ALTERNATIVE IS TO USE A DISCOUNTED CASH FLOW MODEL, USING THE LATEST ESTIMATES FOR CASH FLOWS, DEFAULTS AND DELINQUENCIES ETC. THE DCF MODEL, CURRENTLY, WILL ALMOST CERTAINLY PRODUCE A HIGHER VALUE THAN LATEST TRADED PRICE (MARKET VALUE). IT'S PROBABLY LEGITIMATE TO USE IT IF THE HOLDER INTENDS TO HOLD THE SECURITY TO MATURITY (PROBABLY ABOUT 7 YEARS). HOWEVER, IF THEY CANNOT DO THAT, AND MANY BANKS CANNOT BE SURE THEY CAN JUST SIT THINGS OUT THAT LONG, THEN VALUING AT CURRENT MARKET VALUE IS THE RIGHT THING TO DO. IT'S THE BEST ESTIMATE OF WHAT THE HOLDER COULD GET IF THEY DISPOSED OF THE SECURITY IN THE SHORT TERM. REMEMBER MOST HOLDERS BOUGHT THESE SECURITIES AS SHORT TERM TRADING POSITIONS. THEY DID NOT BUY THEM INTENDING TO HOLD THEM TO MATURITY.
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There was a legal case in the USA
2007?
A U.S. District Court judge in Cleveland declined foreclosure cases on the grounds that the bank suing to repossess the properties,
Deutsche Bank ?
didn't actually own them. Deutsche Bank held debt securities that were linked to the mortgage loans on the properties, not the mortgages themselves. And the judge ruled that a security backed by a mortgage is not the same as a mortgage.
I am unaware if this went to appeal and was turned over. It could be the scariest little known piece in the jigsaw puzzle.
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You say that the auditors and the FSA can not be both wrong. Just rewind to last year for the answer.I think you need to be careful on your blog too as there is a danger of the ordinary shareholder being lulled back into the banking shares only for the bigger players to make a killing. Personally I think there are a couple more crashes to come this year and I don't see Barclays or Lloyds making it.HSBC is 50/50.When you listen to the likes of Varley it looks like he is still not telling the real position of the bank.
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why did Lloyds takeover HBOS? It makes no commercial sense.....does anyone know the real answer?
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142 barking
Yes. That looks somewhat realistic. All loans that can be called in have been or are being called in. But the banks specialise in this sort of behaviour - overnight retraction of credit - with both businesses large and small and individuals so why is it so unexpected for them. UK bank losses cannot be on UK mortgages because their position is protected by insurance policies paid by the UK householder. Losses on property are the problem of the householder and insurance sector. So what exactly are the bank losses, where are they located, and why should the UK taxpayer be involved.
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Elsewhere - delays in moderation have to be seen rightly or wrongly as an attempt to muffle debate. That is the direct effect and if it is not the intent then the BBC should comment to that effect. In response to an aside on the steel thread re IP I posted number 149 on that thread re 4x4 technolgy and it took longer than any 3 hours. It appeared eventually, presumably having been checked by somebody who knew more than the person who stopped it in the first place. It contains very very basic info widely available, virtually all of which will have been broadcast on the BBC at one time or another but which could vaugely appear devisive to somebody who knows nothing about the sector, eg amongst other info the fact 4x4s are not crash impact protection tested and are poor in that respect in accidents (Fact). The problem appears to be that somebody somewhere collectively is continually complaining about free discussion from individuals who have a point of view which sometimes challenges what HMG and business policies are putting forward. Free discussion does not affect the truth of the situation. But realistically how many in trouble will want to present the whole picture. If anything business is more cagey than HMG on issues. When I commented about the rather strange man management portrayed in a widely and endlessly repeated ad where they appear to do nothing but have meetings and drink it was rapidly removed following complaint presumably from the business or its 'friends'. Incidentally on a casual basis it would appear that sometimes wild comment about issues overseas is seldom challenged. It is UK focused comment that appears affected, which supports the interference concept.
Obama in the US says he wants a more open government with more internet interactivity. Lets hope he does it because it will then end up over here in time. Currently the squirming over the application of the FoI Act is typical here. Businesses and politicans who want to wind back the immediacy of the internet are wasting their time. The fact is they do not seem to understand the internet and the impact it is likely to have on all aspects of society.
Whilst it is easy to throw comment at the BBC it has to be acknowledged that the BBC appears to be under attack continually so the task cannot be easy. As much of the attack is not on view you have to wonder just what goes on day to day.
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Can Tax Payers obtain Charging Orders upon Bank Directors interest in properties, (like they do for customers defaulting on a payment installment), or do they apply different contradictory rules for themselves
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Either the Chairman of Lloyds Banking Group is lying or you are being misinformed regarding the conversion of the preference shares was the chairman write to all shareholders regarding the buy back of the conversion shares during 2009.
If you are wrong maybe it will stop you from making comments which I suggest effect the Banking share prices as much as any speculator.
If the Chairman has "changed his mind" in order to keep in with Gordon then he should resign if only for the waste in financial cost in writing to every share holder in the first instance and also providing false hope which could result in share holders buying more shares for a long term investment. His lack of support for the CEO who's reputation has risen over recent years is to be regretted.
As a retired employee I would suggest that the good old days of Sir Brian Pitman would be a welcome release in 2009.
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Re: 96 JayPee28bpr
JayPee it seems that my comment about the way the stock market (traders) for no apprent reason aggressively mark down the share price, of a certain company, one day and then a day or two later mark them back up again, seems to have touched a raw nerve with you.
Let me make it abundantly clear that I am not speaking as some financial smart a..e with 20/20 hindsight vision. I do however regard with suspicion any person, business or institution that operates in the manner that I have described above.
If anyone does have specialist knowledge (that does not constitute insider trading) about a particular company that compels them to aggresively mark down the share price then that knowledge and his/her behaviour should stand up to closer scrutiny.
If the information can stand up to closer scrutiny then I will be amongst the first to say well spotted and good luck to them. If on the other hand it does not stand up to closer scrutiny then I will shed no tears for any individual or business that behaves in such a reckless manner if they are forced to suffer for their actions.
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I am an ex-HBOS employee and shareholder. The main problem with HBOS is not the Halifax mortgage book but Bank of Scotland and their extremely risky lending and the rot started with the merger of the two companies.
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Now I know this bank very well and they are a very shrewd company and by taking on HBOS they have saved hundreds of thousands of people from misery As such I think they deserve some support.
Lloyds have always been more conservative in their lending and lend out at what for-the- industry very low loan-to valuation percentages.They are also very careful who they lend to.
I think they look like an excellent buy and the taxpayers money will be repaid many times over when their share price bounces back up as it has already started to do.
I have no shares so do not stand to gain by saying this.
Also HBOS was sunk not by its losses but by its cashflow which was stymied by panic withdrawals.There is no bank in the world which could have survived what they went through ,without government support, and yet,in spite of this HBOS WERE A GREAT BANK.The HBOS portion will generate massive profits for Lloyds and the reason HMGsupported HBOSand RBS is that they were obviously worth saving as they are so profitable 19 years out of 20.
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Can anybody tell me why Lloyds bothered saving HBOS if the Government is going to end up owning over 50% of the combined group, and if, as it sometimes appears, this is a Political backscratching decision, could Lloyds shareholders sue the Directors at Lloyds?
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Re #143
You say it's strange that Barclays could produce a report so quickly.
Not. At. All.
If you'd done your research before posting you might have found that Barclays was due to publish their end of year results in a couple of weeks.
Therefore the report would have been completed (or very near completed).
Just setting the fact outs.
Please remember Barclays is the only UK based high street bank that did not go cap in hand to the tax payer - in fact if it hadn't been for the change to the rules imposed on them ordering them to raise their capital reserves I doubt that they would have needed to raise any funds.
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