If the management is to be believed, the Barclays share price of about 50p now is very low. Is the market right in not trusting the management? Only time will tell. For the record, I give below some of the comments by management recently. It will be interesting to look at these a year or so from now.
John Varley's interview on 22 Jan 09 at Cantos
...the government was very clear it’s not looking for ordinary equity as a means of satisfying that payment [for insurance of toxic assets]. Or it could be cash. What is our predisposition? Our predisposition would be to pay in cash.
We felt that by saying what we said - that consensus profit before tax for Barclays for calendar year 2008 is £5.3bn and that we expected was to announce a pre-tax profit result well ahead of consensus. The reason for saying that is it would be irreconcilable for our trading performance in the fourth quarter of 2008 to have been very bad for us to have been able to say what we said about our performance relative to consensus.
...we said two things about our capital ratios in our announcement last Friday. We said that on a pro-forma basis - taking account of the conversion of the mandatory convertible notes that are convertible by the end of June of this year - that our core tier one ratio would be 6.5 percent at the year end and that our tier one ratio would be 9.5 percent at the year end. Now that’s important because in each of those cases those capital ratios are well ahead of the regulatory minimum that had been established by the Financial Services Authority.
...we have made many statements to the market during the course of 2008. We have raised capital during the course of 2008. But each time we do that not only are there rigorous internal processes – in other words the Risk Committee of the Board and the Accounts Committee of the Board and the Audit Committee of the Board – ensuring that it is satisfied with the rigour with which these numbers are prepared. Not only that. Not only the application of scrutiny and rigour by external auditors, but also of course the application of rigour and scrutiny by sponsors as we have issued capital. So we have an absolutely clear obligation to ensure that we apply the appropriate process to the publication of our numbers. We take that obligation with deadly seriousness. We have a real time obligation to ensure that the numbers that we publish are reliable and our numbers are reliable.
There’s one last acid test that it is worth referring to as well, which is that the best justification of the realism of the marks is whether when you dispose of assets you dispose of them at the marks. During the course of 2008 we have disposed of substantial amounts of assets and we have disposed of those assets at the marks.
... the tripartite authorities rely on the Financial Services Authority to undertake that scrutiny on their behalf in respect of all banks. We have in Barclays, as other banks do, what is referred to by the Financial Services Authority as a close and continuous relationship which requires us to give full disclosure at all times and, of course, the Financial Services Authority acting on behalf of the tripartite authorities ensure that they understand very intimately what’s going on in terms of the way in which the business is being run and that they have good disclosure and good transparency relating to our balance sheet and again, that’s an obligation that we take with deadly seriousness because if we were not honouring that obligation, believe me we would not be allowed to do business, simple as that.
We are open for business and the best way of judging that is by reference to our activity levels. If I look, for example, at lending to small and medium enterprise businesses, customers who have a business turnover of up to £20m, we’ve increased that lending during the course of 2008 by about 7 percent. If I look at the business start up market, Barclays has never been more active than today. If I look at residential mortgages, another area of important credit provision to the markets, the average of our new lending market share during the period 2005 through 2007 was about 5 percent. What’s the equivalent figure in 2008? It’s well over 25 percent. We are open for business.
The Times of 23 Jan 09
...according to Barclays’ view of the world, RBS was simply an “extreme example” that, along with HBOS, was not genuinely representative of the rest of the banking sector, with HSBC, Barclays and Banco Santander, Abbey’s Spanish owner, in “a different space” from HBOS and RBS.
The bank notes that its Tier 1 capital ratio, a key measure of financial strength, stands at 9.5 per cent – comfortably higher than the 6 per cent to 7 per cent expected by the Financial Services Authority – while a more generous interpretation of the capital rules could make that look even better.
Mr Varley is expected to stick to the bank’s policy, widely criticised in the market, of not writing down the value of some instruments on its balance sheet “to market” – the price they would reach if sold today – as others have done. However, one analyst said: “Intellectually, Barclays may well be right. But they are in the eye of the storm and it doesn’t matter what the facts are. The market is saying it doesn’t know what the facts are, so it is discounting what is known, just in case.”
The Independent of 23 Jan 09
Mr Varley said the Financial Services Authority had been in close contact and was comfortable with the bank's disclosures about its balance sheet. "If we were not honouring that obligation, believe me we would not be allowed to do business, simple as that," he said.
The Scotsman of 23 Jan 09
Barclays said yesterday that the suggestion of foreign control was "based on the premise that Barclays will need to raise capital before 30 June". It added: "We said in our statement of 16 January that our pro forma tier 1 capital ratio is approximately 9.5 per cent, well ahead of the level required by the Financial Services Authority."
Barclays said the anti-dilution clause in the Mandatory Convertible Notes agreement had been present in other fund raisings of this type and was fully disclosed. The bank added: "This clause has no bearing on Barclays' ability to participate in the package of measures announced by the Tri-partite Authorities on Monday."
Barclays said the anti-dilution clause in the Mandatory Convertible Notes agreement had been present in other fund raisings of this type and was fully disclosed. The bank added: "This clause has no bearing on Barclays' ability to participate in the package of measures announced by the Tri-partite Authorities on Monday."
