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BARCLAY'S SENT SOARING AFTER FSA ALL CLEAR

SOAR: Barclay's shares soared

Saturday March 28,2009

By Peter Cunliffe

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Barclays shares jumped yesterday after it emerged the City watchdog had given the bank’s finances a clean bill of health, easing fears that it could be forced into part-nationalisation.

The Financial Services Authority has carried out a stress test on the FTSE 100 company and concluded it does not need to raise extra cash to survive.

The green light comes at a vital time for Barclays as it considers whether to take part in a Government scheme to insure high-risk debts.

It lifts the threat of having to offer shares to the Government as part of any deal and also means the bank is under no pressure to tap shareholders for cash. The shares rose 33¾p to 173¾p.

Management led by John Varley have consistently said they preferred to go it alone rather than follow the nationalisation route forced on rivals Lloyds and Royal Bank of Scotland.

The company has until next Tuesday to decide whether to take part in the asset protection scheme.

There had been speculation Barclays would have to fund any fees involved by selling a stake to the state but it now has the option of taking part on its own terms and without giving up any independence. Similar stress testing for Lloyds and RBS resulted in them handing large shareholdings to the taxpayer.

Barclays’ financial position could be further strengthened by the sale of its asset management business iShares which analysts believe could fetch between £3billion and £4billion.

The company is in talks with potential buyers including Goldman Sachs, Bain Capital and a consortium of Hellman & Friedman and Apax Partners. A deal could be announced as early as next week.

The FSA declined to comment, but Barclays confirmed it had been subject to a stress test which showed its capital position met regulators’ requirements.

Shares in Barclays have more than doubled in the past three weeks, lifting its stock market value to more than £12billion.

“This is likely to be seen as further evidence that the risk management at Barclays has been superior thus far in the recession,” said broker Cazenove.