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Nationalization premium to work at BarCap?

Barclays Capital may be one of the only investment banks hiring, but its appeal is waning. Prospective employees said to be demanding guarantees and pay premiums to compensate for the danger of nationalisation.

Shares in Barclays Plc are down more than 10% this morning and down more than 84% in 12 months. Last Thursday alone they plummeted 25% following a Panmure Gordon report suggesting Barclays could be in line for impairment charges of 13bn this year if monolines default and it’s forced to writedown its CLOs .

Barclays is consulting with the Treasury on participation in the UK government’s Asset Protection Scheme. If the scheme is deemed in ‘shareholders’ interests’, it allegedly intends to ask the government to insure a modest 60bn of its 2 trillion of its balance sheet against further writedowns.

It’s not unthinkable that Barclays – and the bankers at BarCap could yet follow Lloyds and RBS into the arms of the British government.

“With Lloyds today, the government appears to have changed the rules about what is an adequate level of capital,” says Simon Maughan, head of European banks analysis at MF Global. “The implication is that Barclays doesn’t have sufficient capital and the only source of additional capital is likely to be the government.”

None of this plays well to BarCap’s ambition to hire people for its European equities and advisory businesses.

But headhunters working for the bank say most prospective hires have other things on their minds.

“There’s a lot of people who want to talk to them,” says one. “Every bank has a significant chance of being nationalized now. There are no risk free options out there.”

Comments (15)

  1. Barclays is a goner. Have people forgot how to read a balance sheet?…

  2. I don’t know why people keep talking about an equities business at Barcap. In UK and Europe it was always about fixed income and fixed income derivatives. Equity bankers should get a premium to work there but on the other hand, it’s not like they can go anywhere else right now and get a better deal. Just wait to ride it out this recession……

  3. Pablo: What about Barclays’ Balance Sheet makes it a goner? You should back up your comments with facts if not you will not be taken seriously!

  4. @common sense – how about the fact that they have no idea to value their assets for a starters…

  5. I think it’s pretty clear deep-pocketed investors in the middle-east and/or the British govt have no interest letting Barclays go bust. So that should be enough reassurance considering a job there if it is interesting and pays well enough. It’s not exactly like any competitors’ prospects look more appealing right now.

    utter nonsense Reply
  6. Maybe its that their balance sheet is larger than the GDP of the United Kingdom? Their tax planning, doing anything to not limit bonuses, deferring cash payments for two years (at 10% junk bond style). What could possibly go wrong?

    Nationalised by end of the year.

  7. Pablo has a point here boys.

    I’m an equity analyst and today i just finished reading an old Times article:


    which basically says just a 1% fall in the value of Barclays assets means the capital base is wiped out. So Barclays may go cap in hand to the UK government for more money. Middle Eastern Investors may not have a choice to invest if Mervyn King and Alistair Darling are sufficiently motivated to stop them. Nationalisation could well be on the cards Q42009.

  8. I take it that .. either..
    1.There are some “gambling arcade” shorters of Barclays stock on this board
    2. ( as common sense pointed out) Some on this medium do not know how to interpret balance sheets or gauge public opinion

    The chance of Barclays going the same way as their less illiustrous peers is frankly small. They appear able to ride out the storm readily enough and i doubt that more than a single digits worth of prospective employees have talked about guarantees vis a vis Barclays and its future course

  9. @Richard: “which basically says just a 1% fall in the value of Barclays assets means the capital base is wiped out. ”

    This is true of any other bank too. Depending on the bank it’s actually more like 0.8%-1.25% fall in assets. How can you be an equity analyst and not know the basics of regualtory Tier 1 capital & leverage?

  10. Ok, I put my hands up! I don’t cover financial stocks, I cover telecoms. But still having no cash by the end of the year is bad news, which looks pretty likely the ways things are. Although I’m not an expert, I see in the media that the government now has a stake in most UK banking groups. So given this background I am left wondering…how long can Barclays keep the government at bay?

  11. You are really tiring and soaked in pessimism.
    Yet there is something worse than nationalisation by Q4 2009, i.e. that you get a fatal disease by Q3 2009.
    Get a life, guys! Barclays is alive and kicking.

  12. We’ll find out who’s right much sooner…

    “Barclays was warned on Monday that its balance sheet would be subject to forensic Treasury examination if it decided to dump toxic assets on the taxpayer, amid signs that the bank could face a higher-than-expected bill for using the government’s asset insurance scheme.”

  13. 50% of their balance sheet is derivatives.
    Their balance sheet has also doubled since laster year.
    You don’t have to be Sherlock Holmes.
    How are these derivatives valued? Who are the counterparties? Who underwrites them?

  14. Sorry to labour a point but I think it’s important. Where pray tell did Barclays manage to acquire nearly 1 trillion (p12 consol balance sheet) of new non-toxic totally sound assets during the year of our lord 2008? If we make a not far fetched conservative assumption that maybe these are valued strangely given they’ve only just appeared, say 75% Barclays then has a 246 billion hole in its balance sheet (equivalent to 2/3 of customers deposits). You can make much scarier scenarios yourself.

  15. Pablo seems to have a personal problem with Barclays. Put your head in the sand and you won’t hear the explosion.

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