Tuesday, 7 September 2010
Diamond will break-up Barclays
In the last year, Barclays has been engaged in a process of trying to integrate the UK Corporate Bank and the Investment bank. The idea being to sell profitable and complex products to the UK corporate base. The other banks look on in bemusement, wondering how you sell hedges and swaps to small companies in Norfolk.
Still, it is a brave try and perhaps was done with a view of Bob Diamond taking over. Mr Diamond would probably rather run an investment bank alone and sell off Barclays retail and Barclaycard altogether. Even the UK Government would welcome this as it would reduce some risk in the system of a huge Investment bank going under and taking the retail bank with it (note Barclays did very well our of the credit crunch though, so clearly has some very good risk management practices). Shareholders too might like to see a break-up as they eye an improved sum-of-the-parts valuation.
However, the merger of Barcorp and Barcap now presents itself as something of a poison pill, unless it is purely the retail bank that is to be sold off. Long term I just can't see Barcap and Barclays staying together with Diamond in charge. Fun times ahead for shareholders in the next year or so. The market has been fairly neutral in reaction today, but the bank remains a buy under 300p if I ever free up any more cash.