Varley's and Diamond's views

As reported in Telegraph of 29 June 08:

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/06/29/cnbarc129.xml

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/29/ccprof129.xml&page=1

Extracts:

Without extra funds, Citi estimates that Barclays will have a tier-one capital ratio of 5.8 per cent at the end of 2008, which would be the "ninth worst [of 66 banks] in Europe". However, Mr Varley, interviewed with Barclays president and investment banking head Bob Diamond, responded:
"Bob and I hear people talking in the market, talking as though there is some eternal truth about an equity ratio of 6 per cent or 6.5 per cent.
"As an organisation, you have to form a point of view about how much capital you need to run your business.
"You have to be prudent in that and you have to be analytical in that. You have to determine that number and that's what you've got to have. You don't want to have a penny more than that because if you have surplus capital you dilute your returns."

Mr Varley said: "The environment is in itself humbling. This has been a very significant market dislocation. The question is how do you handle that? How do you manage the risk? How do you cope with the difficulties the environment throws up? If you analyse Barclays through that relative light, Barclays has coped well with that environment."

"...I don't think we've been behaving like a constrained [by capital inadequacy] bank.
I don't see constraint in the hiring that Bob's been doing in his businesses. I don't see it in the acquisition of a bank in Russia, I don't see it in the acquisition of a credit card business in the UK and I don't see it in the opening of 600 branches outside the UK in the first five months of this year.
We're not behaving like a bank that's hunkered down and uncertain about the future. We're very clear about what we should be doing."

Diamond believes a particular opportunity is the US. "We've been cautious in the US," he says, "because most foreign banks have not succeeded when they've entered the US market. It's bigger, yes, but it's far more competitive.
"However, we entered 2008 with six or seven of the key players in the US domestic capital markets pulling back.
"It's counter-trend to be investing in the US but we see an opportunity to move into the top three or top five in all the areas that are important to us and we're already seeing progress."
Indeed, in the first half of 2008, Diamond says Barclays will be in the US top three for agency residential mortgages, when it has previously never even been in the top 10.
"We're not going to do everything in the US all at once but we do have a plan that will take us two to three years and will be a significant investment," he says.
"The conventional wisdom is that you can grow organically in some businesses but not in retail and commercial banking. We are defying that."

Will the £4.5bn be enough? "Yes, I mean, of course," replies Varley. "We have thought carefully about what resources we need. You don't want to have a penny more than that because if you have surplus capital you dilute your returns. We have been thoughtful and I hope that if you look at Barclays over the years, you can see a pattern of thoughtfulness"