Barclays' pounds 300m share buy-back comes unstuck

Barclays yesterday failed in its attempt to buy back pounds 300m worth of shares, with institutional investors apparently wary of the bank's volatile share price in recent days and because of the abolition of tax- breaks announced by the Chancellor of the Exchequer last autumn.

The bank managed to pick up only around pounds 100m worth of shares. Martin Taylor, chief executive of Barclays, said he was surprised "we didn't get more stock offered".

Until Kenneth Clarke, the Chancellor, made his move, institutions could reclaim 20 per cent tax because share buy-backs were treated as dividend payments.

Mr Taylor said the reluctance of investors to offer their shares for sale may also have been affected by the fact that Barclays' staff share scheme had been buying up shares last week. That may have had the effect of "sweeping up loose stock", Mr Taylor said.

Barclays paid pounds 11.37 each for the 9.21 million shares it repurchased yesterday - a premium of around 1 per cent over Tuesday's closing price. Shares in Barclays closed at pounds 11.27p, up 5p on the day, off higher levels seen in early trade when the buy-back was first announced.

"While it is encouraging in many ways that there were not enough sellers of shares at the current price to enable us to complete our planned purchase this morning, we remain committed to returning capital to shareholders and shall be looking to buy further shares as appropriate," Mr Taylor said.

Last week, when the bank announced record profits of pounds 2.35bn, Mr Taylor said the bank had pounds 500m of surplus funds that would be returned to shareholders.

Mr Taylor said that the bank would have been able to buy back more than the pounds 100m it managed to yesterday if it been prepared to bid a higher price. "It seemed to be a better deal to take pounds 100m at 1,137p and draw a line there," he said.

This was Barclays fourth buy-back in recent years, collectively returning around pounds 1.1bn to shareholders. Barclays believes buy-backs are an efficient way to maximise returns to shareholders because they enhance earnings per share.

In 1995, Barclays bought back pounds 180m of shares, followed by pounds 306m in February 1996 and pounds 470m in August 1996.