After several weeks of strengthening rumours, Barclays has finally confirmed the details of the sale of its asset management arm, Barclays Global Investors (BGI). The bank will sell the operation to US fund manager, BlackRock for $13.5bn (£8.2bn). Around £4bn of that will be in cash and the remainder in BlackRock shares - leaving Barclays with a 19.9 per cent stake in BlackRock.
This deal, plus the sale of the iShares exchange-traded fund operation earlier this year, is being presented as a triumph, with the capital so secured making it even less likely that Barclays will ever need to beg the government for money as others have done.
What is less readily talked about is what it's giving up tomorrow to secure capital adequacy today. BGI was a decent source of growth for Barclays. UK high street banking was low-growth even before the recession.
"Selling circa 16 per cent of 2009's expected earnings for a 15 per cent increase in tangible book value is a sign of changing times," points out banking analyst Alex Potter of broker Collins Stewart. "Barclays’ lack of emerging markets earnings, and UK bank millstone, means 2010 growth will likely be lacking." Mr Potter also expressed concerns about where return on equity levels for investment banks would ultimately settle. With iShares and BGI gone, the proportion of profit generated by the substantial Barclays Capital operation will start to make Barclays look distinctly like an investment bank.
