Barclays Is Beaten up in First Half

Barclays had a terrible offering in which investors soaked up only 19% of the juice the bank Leaving the Qatar government pick up the remainder giving it a 6% stake in the bank.

Barclays said Friday that its existing shareholders had signed up to buy less than a fifth of its £4.5 billion rights issue, meaning that Qatari and Asian investors will provide the bulk of the fund-raising.

Barclays said last month that it had raised funds from major investors in Qatar, Japan, China, Singapore and elsewhere and that it would give existing shareholders the chance to buy on the same terms for the issue, which is the equivalent of $8.9 billion.

The disastrous event bode ill for the shell shocked bank as it signaled a change in investor confidence. That confidence was not enhanced by the bank when it reported its fiscal first half 2008 earnings three weeks later.

The credit crunch continues to take its toll on British banks. On Aug. 7, Barclays revealed its first-half pretax profits fell by one-third, to $5.4 billion, after the bank took credit-related writedowns of $5.5 billion. Describing the bank's performance as "acutely disappointing," CEO John Varley all but apologized for the decline in company's share price over the past year: "Our shareholders have had to endure a lot."

Barclays also revealed a sharp rise in bad debts. For the six months ended in June, total bad debts rose by 155% from the previous year, to $4.7 billion, as subprime mortgages and other credit-related investments plunged in value. And the investment bank Barclays Capital, which many analysts expected to fall victim to the credit crunch, posted net losses of $4 billion.

The write-downs this year were partly offset by an £852 million gain on the bank's own debt.
Well that's a cool £852, pounds of winning for losing, but it smells a lot like level three to me.
However you count it in small fries if the bank really does have to write down another1.5 billion in the second half.

Barclays may need to write down 1.5 billion pounds more over the next 18 months, analysts at Goldman Sachs said adding the bank has little room to absorb further material losses without the dividend potentially being cut or paid in shares.

Another brokerage, Cazenove, downgraded Barclays to "in-line" from "outperform," citing share price outperformance, and said though the bank had performed well given the disruption in financial markets, it still faces a weak economic outlook and lower balance-sheet gearing.

The clock will be ticking and the calculator clicking all the way till then.