Institutions inundate Barclays with offer of shares for buy-back
NatWest main beneficiary as investors switch their allegiance, reports John Eisenhammer
Thursday 10 August 1995
Market sources said Barclays was offered about 8.7 per cent of its own share capital by institutions when it first announced the repurchase programme early yesterday morning, but actually bought back only 1.5 per cent of its share capital.
Barclays' share price closed down 23p at 703p. The bank had announced at its interim results on Tuesday its intention to pull back the rapid capital build-up by buying back some shares. The purchase will reduce Barclays' Tier One capital ratio, a key indicator of banks' capital adequacy - by 0.2 per cent from its level of 7.8 per cent.
"There are quite likely to be more purchases in the future, as part of a staged capital management process to stop the equity base from rising too much while the bank is generating strong revenues," a spokeswoman said.
NatWest Group appeared to be the main beneficiary as investors switched the proceeds from their Barclays sell-off into the rival bank's stock.
NatWest shares closed up 19p yesterday at 596p.
The high level of institutional demand for the limited Barclays' offering was driven in large part by tax considerations.
Funds that enjoy tax-exempt status, such as pension funds, were able to claim tax credits on this sort of operation, which is treated as a distribution similar to a dividend payment.
Pension funds were able to take a tax credit equivalent to 20 per cent of the purchase price. Although tendered at 719p, the real value of these shares to the funds was nearer 890p, analysts said.
The demand was also fuelled by an element of profit-taking. Terry Smith, of Collins Stewart stockbrokers, said: "In the past there were four reasons driving Barclays shares: shrinking the business; delivering surplus capital; cost-cutting and a cyclical recovery in bad debts. These have now largely been delivered, so it is probably not a bad time to move on."
At the time of the buy-back at 719p, Barclays shares stood at 726p. Barclays sold the shares via its own investment banking arm, BZW, and Cazenove & Co.
To compound the effect of the small share buy-back, there are two other events in the pipeline which will reduce the pressure strong earnings are placing on Barclays' capital ratio.
Completion of the purchase of Wells Fargo Nikko, the US fund manager, should take off 0.2 per cent, while the introduction of the new European Union capital adequacy rules in January 1996 should reduce it by a further 0.5 per cent.
Sales of the tablet are set to fall again, say analysts
Does Chris Grayling realise what a vague concept he is dealing with?
Met Police confirm it was a 'minor disturbance' and no-one was arrested
Concerns raised phenomenon is threatening resort's image as a family destination
I Am Bread could actually be a challenging and nuanced title
Eccentric Fury star, 28, reveals he is 'not a really confident actor'
Peter Biaksangzuala died from his injuries in hospital on Sunday
The X Factor's judges colourful outfit was mocked by Simon Cowell
Footage shot by a passerby shows moment an ill man was carried out of his burning home
- 1 Ebola outbreak: What is bushmeat – and is it to blame for the disease that has killed thousands?
- 2 Star Wars memorabilia called a 'bit of plastic' on Antiques Roadshow by Fiona Bruce valued at £50,000
- 3 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 4 Russell Brand might seem like a sexy revolutionary worth getting behind, but he will only fail his fans
- 5 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Sophia Loren: How I rejected Cary Grant and 'pulverised' Marlon Brando with my eyes
Ebola outbreak: What is bushmeat – and is it to blame for the disease that has killed thousands?
'Russian submarine spotted' by Swedish military off coast of Stockholm
Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Oscar Pistorius sentence: Athlete's wealth and notoriety provoke an overdue debate on South African prisons
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Sorry Judy Finnigan – Ched Evans is no less sickening than an alleyway rapist
Residents should throw a street party and mix with immigrant neighbours, councils told
Workers 'could be forced to pay £5 a week' to get benefits
Russell Brand threatened with arrest after filming outside Fox News headquarters
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
iJobs Money & Business
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...