Barclays shares slump 10% before bail-out talks

09 March 2009 / by Rachel Mason
Shares in Barclays have plunged nearly 10 per cent today ahead of expected negotiations with the Government over a taxpayer bailout.

The bank's stock fell 6.3p this morning – on Friday, Barclays share price was 64.8p by 9.30am today it had already fallen 9.72 per cent to 58.5p.

The share slump is likely to be as a result of investors worrying about the outcome of Barclays' talks with the Government later today where it will be decided whether or not the bank will receive taxpayer guarantees for its toxic loans as part of the Government's Asset Protection Scheme.

Over the weekend, it was revealed that Lloyds Banking Group put £44 billion of loans into the APS as part of a deal worth an estimated £260billion which is set to make the taxpayer the majority owners of the group.(Lloyds to be 65% taxpayer owned).

According to the Guardian, Barclays is holding a series of high-level meetings with its biggest City investors today, the aim of which is to "gauge the level of hostility towards the board, particularly its chairman, Marcus Agius," and also to work out whether or not it should take part in the Government's toxic assets insurance scheme and if so, to what extent.

Last year, in order to raise funds and avoid taking UK taxpayers money, Middle Eastern investors were sold Barclays shares. But, the move was said to be a breach of 'pre-emption rights' because existing shareholders were not given the opportunity to take part; it is because of this the Barclays board – headed by Mr Agius – are under fire, and are going to have to stand for re-election at the annual meeting next month.

Although at the time, the Middle Eastern cash injection allowed Barclays to pass on taxpayer cash, now it may not be possible for Barclays to avoid taking part in the scheme - which sees banks pay a fee to receive protection for a proportion of their balance sheets so that the "healthier core" of their commercial business can continue to lend to creditworthy businesses and households.

Although it is not known how many assets Barclays might want to cover through the APS, according to the Guardian, the bank "has already submitted one portfolio of loans for analysis by the Treasury, which is expected to step up discussions with Barclays this week after completing negotiations with Lloyds late on Friday."

The Government has set a deadline of March 31 for agreeing terms of the scheme, which will be set separately for each bank taking part.

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