Barclays shares slide as merger plans stay vague

Shares in Barclays, the banking group, sank 6 per cent yesterday as the City expressed its disappointment at a lacklustre set of full-year results and the absence of positive news on merger plans.

News of a pounds 500m share buyback programme failed to cheer analysts, many of whom had been hoping for a bullish statement on future strategy.

But although Martin Taylor, Barclays' chief executive, said the case for further rationalisation was "compelling", he refused to comment specifically on the identity of possible merger partners.

One banking analyst said: "Consolidation rumours have driven this share price up, and if he [Mr Taylor] doesn't say anything positive on consolidation soon, people are going to get a bit worried."

Persistent takeover rumours - in particular, speculation about a possible link-up with NatWest - have sent Barclays' share price soaring in recent months. Since the autumn, shares have risen by more than a third. But yesterday they shed 118p to close at 1813p.

Barclays' pre-tax profit for the year to December slumped 26 per cent to pounds 1.7bn - lower than expected - prompting unfavourable comparisons with rival Lloyds TSB, which last week unveiled record 1997 profits of pounds 3.2bn.

The sell-off of parts of BZW, Barclays' former investment banking arm, was the main reason for the profit fall. Two weeks ago, the bank admitted that it would take a pounds 688m hit following the sale of its equity and corporate advisory businesses.

The City had already been told about the BZW figures, but was surprised yesterday by the size of some other costs.

The bank has set aside an additional pounds 25m to cover compensation for non- priority cases in the pensions mis-selling scandal. It also said yesterday preparations for EMU and the year 2000 would cost a total of pounds 400m.

If the UK enters EMU on a retail basis, where the currency will be used on the high street, Barclays will incur a further pounds 300m in costs as cash machines and other types of technology are changed.

Barclays took the opportunity yesterday to spell out its degree of exposure to Asia. The bank has an exposure of pounds 1.2bn to Korea, Indonesia and Thailand, 15 per cent of which is in the corporate sector. Barclays has made an additional provisions of pounds 45m to cover the increased risk of default in Asia.

When questioned about the possibility of mergers in the banking industry, Mr Taylor reiterated his view on rationalisation in the sector.

He said: "I think the arguments for banking consolidation in the next decade are absolutely compelling. There is no doubt at all that we'll see a substantial reduction in the number of international banks." Although he expected there would be cross-border mergers, "you do tend to get domestic consolidation first, for all sorts of reasons".

But Mr Taylor would not be drawn into a discussion of likely merger partners for Barclays, although he admitted "cultural incompatibility" could destroy shareholder value.

Mr Taylor also provided details of Barclays' new structure, which will come into effect on April 1. The bank is to be re-organised into four groups: Retail Financial Services, Corporate Banking, Barclays Global Investors, and Barclays Capital, the remnants of BZW.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power