Barclays is still grappling with the effects of the lifeline that saved it from nationalisation in 2008. The UK bank is being sued by Amanda Staveley, whose outfit PCP Capital Partners helped arrange the Abu Dhabi leg of an £11.8-billion capital hike. The injection stopped Barclays falling into government ownership, as Royal Bank of Scotland did. But the positive returns from that are under some pressure.
Had investors been given a choice on June 20, 2008 - just before the first of two capital raisings - they would almost certainly have preferred to hold Barclays' shares than RBS's. Since then, Barclays' shares have fallen 34 per cent, but RBS's are down 88 per cent, after allowing for various shifts to the share count and price. Rebase the two banks' price-to-book values - a key valuation measure for banks - to the same date and Barclays' is down 34 per cent against RBS's 65 per cent. Barclays also escaped years of state meddling that arguably damaged RBS's franchise.
But the Middle East capital raising has had obvious drawbacks. As well as Staveley's legal challenge, there's a £50-million pending fine to the UK's Financial Conduct Authority for inadequate disclosure over the primary purpose of fees paid in connection with the Qatari leg of the capital raising, and an ongoing probe by Britain's Serious Fraud Office.
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Shareholders and bank managers probably don't think narrowly about stock performance these days. Reputational and ethical issues matter more. Had Barclays been nationalised, it might not have avoided a reputational implosion from the Libor scandal in 2012. After all, RBS got stung for that too. But the UK government might have taken an axe to Barclays' culture before it was lambasted in a 2013 UK review, and forced a resolution to the strategic headache over what Barclays should do with its investment bank. The Middle East blessing still has elements of a curse.
