February 28, 2020 / 3:40 PM / a month ago

Breakingviews - Barclays 2008 gamble has nuanced investor legacy

Former Barclays banker Richard Boath talks to the media as he leaves the Old Bailey Central Criminal Court in London, Britain, February 28, 2020.

LONDON (Reuters Breakingviews) - Barclays has mostly shrugged off the shroud of its Qatari crisis-era cash call. A London jury on Friday acquitted three senior ex-employees of fraud in connection with the 2008 capital raising. Former Chief Executive John Varley was cleared last June, while a case against the bank itself was dismissed in 2018. Yet the saga leaves a nuanced legacy for investors in the 26 billion pound lender. 

The latest acquittal is embarrassing for Britain’s Serious Fraud Office, which alleged that the bankers helped funnel secret fees to Qatar in connection with a two-stage, 11 billion pound fundraising in 2008. Defendants Roger Jenkins, Tom Kalaris and Richard Boath denied wrongdoing, and said the payments were designed to help secure lucrative business from the resource-rich Gulf state. The jury’s acquittal of the three men may increase political pressure on the SFO: Britain’s ruling Conservative Party had previously pledged to scrap the body. 

For investors, the main consequence of the Qatari episode was that Barclays forestalled a state bailout, unlike domestic peers Royal Bank of Scotland and Lloyds Banking Group. Its stock-market record ever since is unequivocal. Barclays shareholders saw an annualised return including dividends of minus 5% between the start of 2008 and the end of 2019. Lloyds’ equivalent figure over the same period was minus 8%, while RBS’ was an even more woeful minus 18%, Refinitiv data indicates. 

Government cash comes at a heavy price for banks, whose executives are typically cleared out. Barclays’ independence allowed the lender to keep its large investment bank, rather than go through an RBS-style restructuring of the wholesale business. Such exercises absorb capital that could otherwise be paid out to shareholders. 

Yet RBS and Lloyds’ painful overhauls also brought greater strategic clarity. Their shares are now priced at 65% and 91% of respective tangible book value, using the median 2020 Refinitiv estimate. Barclays, whose low-returning investment bank exerts a drag on its valuation, trades at a more humble 53% of tangible book. That will change if investors stop punishing lenders, like Barclays, who lean heavily on volatile markets-based businesses. For now, though, it’s enough to mean that the final assessment of the bank’s Qatari fundraising remains nuanced.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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