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Is this as good as it gets for Barclays Capital?

Barclays Capital isn’t having a good week. No sooner had we said that it might pay very big bonuses than JP Morgan issued an equity research note suggesting that it’s massively undercapitalized and its revenues will fall very soon.

We have belatedly obtained a copy of this note, which appears to have precipitated a 3% drop in Barclays’ share price. It does not paint an entirely pretty picture. In particular, it says that:

· BarCap will need around three times its current level of economic capital by 2010

· BarCap revenues will peak this year and decline in both 2010 and 2011 as the bank adjusts to increased liquidity requirements and pulls back from risky businesses.

Source: JPMorgan (click to enlarge)

BarCap can draw solace from the fact that JP Morgan’s estimates are at odds with Morgan Stanley’s, whose analysts expect its revenues to keep increasing through to 2011. However, if JP analysts are right, there are a few places to be in Barclays Capital, and they are cash equities, prime services and M&A; commodities, rates and FX look less promising.

Slightly ominously, JP Morgan analysts are also predicting a marginal reduction of around 840 in average staff numbers at BarCap between now and 2010. More promisingly, however, they expect profits to remain consistent between 2009 and 2010 before rising in 2011, and that ‘costs per employee are likely to increase significantly.’

Comments (5)

  1. AIG CDS payments will stop and they’ve sold of the crown jewels, the Middle East saw the balance sheet and fled, the rats are leaving the ship (Jenkins, Idzik, god knows who else, I give Diamond end of year). Needless to say the UK tax payer will be left holding the baby when falling circus tent threatens to destroy the retail bank.

  2. Since when is sell-side research interpreted as anything but political hyperbole?

  3. Wonder if the JP Morgan research gurus foresaw the credit crunch.. probably not! And this is just recycling a story that has parts missing again.. The premise is that Barcap will need to raise the capital under proposed new rules, which may or may not be implemented. In other words, eFinancial, its speculative. What drivel.

  4. 3% drop? Oh my god this is such a BIG move in this VERY STABLE market environmnet we are the last 2 years…..What a boring read…

    Poor sucker tax payer get ready to pay more to the fat cats.

  5. ya barclyas is better it does not means that if one financial instituion take unneccasary bonus it mean that every instition are like that those who r eally care for that company they will never take unadvantage if really those company perform well then his employees should get on return that is really good way of functioning business in this market senario every company has to take care of there good employees and they should give reward for there work

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