Barclays loses $650m on sale of BlackRock
BARCLAYS lost $650m (£414m) on its sale of a $6.1bn stake in US fund manager BlackRock yesterday after it scrambled to offload the shares to comply with incoming capital regulations.
The sale, which was managed by a list of 36 book runners led by Barclays, Bank of America Merrill Lynch and Morgan Stanley, valued the shares at $160 each. They were given a valuation of $182 when Barclays acquired them in 2009 as part payment for its sale of Barclays Global Investors to BlackRock.
Yesterday’s sale price of $160 marked a two per cent discount to their closing price on Tuesday, which was $163. BlackRock itself bought back $1bn of the shares.
Since Barclays acquired them, holding onto large equity stakes in financial firms has become extremely expensive for British banks because the FSA is enforcing a strict version of the Basel III capital rules.
That is in contrast to the rules enforced on the continent, where capital regulations do not attach such a high risk-weighting to equity in other firms.
In the UK, the BlackRock holding incurs a 250 per cent risk-weighting, meaning that Barclays had to hold reserve capital against losses in the stake as if it owned £10bn’s worth of stock.
The high opportunity cost of doing so meant the bank was keen to sell up as soon as the three-year lock-in period it had agreed with BlackRock expired.
The bank’s next accounts could book the sale as a profit, because Barclays wrote them down to a value of $148 at the end of last year.