Barclays confident on ABN, but share price key

By Staff
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LONDON, Aug 2 (Reuters) British bank Barclays Plc said it remained confident its takeover bid for Dutch rival ABN AMRO would succeed but acknowledged that much would depend on its share price in the next two months.

''Am I confident about our ability to win the ABN AMRO merger? Yes I am, but I recognise there is a significant dependency on where our stock is trading at the relevant time,'' Barclays Chief Executive John Varley told reporters on a conference call accompanying half-year results.

''The issue is not where the share price is today; it's where the share price is when ABN shareholders come to vote, and that is more than two months away,'' he added.

Britain's third-biggest bank is engaged in the world's biggest bank takeover battle for ABN against a consortium led by Royal Bank of Scotland.

Barclays' offer for ABN, mostly in shares, is currently valued at about 65 billion euros (.8 billion), below the consortium's mostly cash offer of nearly 71 billion euros.

Barclays said it had received regulatory approval to start a 2.4 billion pound share buyback programme on Monday, which it hopes will bolster its share price.

Bob Diamond, Barclays president, also said although much had been made in the media of hedge fund investors in ABN who wanted cash, many others wanted shares in an enlarged bank.

''There are a lot of investors who want shares. There are a lot of investors who if given cash need something to invest in ... I think and I expect they will see the opportunity with Barclays to be far superior in terms of forward-looking earnings and unlocking value,'' Diamond told Reuters in an interview.

By 1015 GMT Barclays shares were up 0.4 percent at 680.5 pence, valuing the bank at just over 44 billion pounds.

CREDIT TURBULENCE Its shares have been hit by sharp falls in equity markets in the past week, which also threaten to slow growth at its Barclays Capital (BarCap) investment banking unit.

Diamond, who also heads BarCap, said turbulence in credit markets was likely to continue and that it would take time for the U.S. subprime mortgage market to recover but the leveraged debt market should recover in the next two to three months.

''There is a supply/demand imbalance. There are a number of deals that aren't executing as we had expected in the market, but I'm confident of our exposures because the underlying corporate credit is so strong,'' Diamond said.

He said BarCap's income in July was ahead of its level a year ago as other areas such as commodities had benefited from ''a flight to quality'' and that he had not altered BarCap's 15 to 20 percent annual growth target.

BarCap's profits jumped 33 percent to 1.66 billion pounds in the first six months of this year and drove a 12 percent rise in group profits to 4.1 billion pounds, the bank confirmed.

The bank released headline results last week when it revised its offer for ABN.

Mike Trippitt, an analyst at Oriel Securities, said the results were solid but that Barclays and other banks faced some issues.

''The word of the reporting season is headwinds, and there are some headwinds here. Overdrafts (refunds) are one, a tough comparison period, and currency, which has taken the wind out of Absa and BGI (Barclays Global Investors),'' Trippitt said.

Barclays said it paid out 87 million pounds in refunds to customers to cover past bank charges.

British banks have been hit by a wave of requests for repayment of charges after a consumer backlash over the fees, and they have repaid some customers who complained. The refunds have since been suspended as banks await a regulatory decision over whether charges on unauthorised overdrafts are fair.

Barclays' refunds were near to the amount announced by rival HBOS and below the nearly 120 million pounds of refunds announced by HSBC this week.

Barclays said profits from its UK retail banking business, which it is attempting to revive after several tough years, rose 9 percent in the first half to 651 million pounds as income grew 5 percent, excluding the settlements on bank charges.

Its share of net mortgage lending was 6 percent in the first half, in line with its traditional share.

REUTERS SRS kp2001

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