Barclays may bid for bank to grow presence in Spain

BARCLAYS is considering a move for one of Spain’s ailing regional banks in a multi-billion pound bailout, according to reports.

Chief executive Bob Diamond is said to have held talks with Spanish prime minister Jose Luis Rodriguez Zapatero over the possibility of the bank receiving guarantees from the government in the event of any deal.

Spain’s regional banks, known as Cajas, have been a major headache for the country’s government after a property boom fuelled by their lending imploded after the credit crunch.

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The Spanish government has already forced through a restructuring that cut their number from 45 to 17 and has ordered them to raise 20bn euros (£17.4bn) to refinance themselves.

Most of that money will come from the state, but the Spanish government is also said to be very keen to attract foreign investors.

It is understood that the talks with Barclays were not about a particular deal, but could allow the bank to identify potential opportunities in the country.

Barclays already has a presence in Spain, but has been urged by City analysts either to increase the size of the business or else leave the country.

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A regional bank would give it that opportunity to expand, but it is said to want government assurances it will not be liable for any potential losses from the existing loan portfolios of the regional banks.

They lent nearly 500bn euros (£435bn) to property groups before the market crashed.

Concern over their health has hit Spain’s sovereign debt rating and contributed to continuing fears about the economic health of the eurozone.

Barclays said the contents of Mr Diamond’s discussions were private.

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The bank posted a nine per cent fall in first-quarter profit in April, missing forecasts, after it took a hit on the value of its own debt and income at its key investment banking arm dipped.

Mr Diamond is planning to sell assets, reshape the bank and slash costs to boost profitability.

Barclays reported a pre-tax profit of £1.66bn for the January-March period, just below forecasts. Adjusted profit, stripping out movement in its own credit, was £2bn, up 10 per cent on the year.

Its Barclays Capital investment bank arm contributed underlying profit of £1.3bn, down 15 per cent on a year ago, as top-line income came in at £3.3bn, down from £3.8bn a year ago.

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Income from its fixed income business fell 22 per cent from a bumper first quarter a year ago, offsetting an 11 per cent rise in equities and 10 per cent rise in advisory income.

The bank said trading in April had been in line with first quarter trends and it was content with current forecasts for 2011, which expect profits to rise to about £7bn.

Barclays employs around 3,000 staff across Yorkshire.

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