Comment: Barclays still in need of care

ANTONY Jenkins says Barclays is making “good progress” towards its goal of becoming the “go to” bank. But the size of the capital raising exercise announced yesterday hinted that it is the “some way to go” bank.

Terry Murden. Picture: TSPL
Terry Murden. Picture: TSPL
Terry Murden. Picture: TSPL

The deeply-discounted £5.8 billion rights issue was a surprise in terms of pricing and scale, but one required to help fill the £12.8bn hole in its reserves.

Although the new Prudential Regulation Authority was satisfied with the plans laid out by Barclays to strengthen its balance sheet, the markets saw the figures as a clear indication that the sector has yet to find its way out of the woods.

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An extra provision of £1.35bn for mis-sold payment protection insurance and £650 million for interest rate swaps shows that the costs of compensation keep on mounting with little sign of halting. Barclays has admitted there may be more to come and this has raised questions about whether Lloyds and Royal Bank of Scotland will issue similar statements.

The positive news is that, with the regulator satisfied, it looks as if Barclays has done enough and its actions should provide assurance around its capital strength. The fact that the shares fell does not bode well, but they were bound to fall back as a result of the share issue.

With the extra capital, Barclays should be in a position to maintain or increase its lending, but it can expect another visit from the regulator if it does not.

Questions remain over IndigoVision warning

IT HAS been an eventful year or so at the Edinburgh technology company IndigoVision, which on Monday saw its shares take a tumble after it issued what was described by Paul Scott at Stockopedia as a “mild” profits warning.

Following the bitter takeover tussle that saw the company fend off an unwanted move to reinstate founder Oliver Vellacott to the board, the firm has attempted to stabilise under its new leadership.

This week’s warning, issued two days before its year-end, looks like a blow to progress, but may have been simply bad timing, according to Scott, who says some orders slipped past the year-end date and left a hole in its results.

But was it as simple as this?

The company missed expectations by some margin, begging questions about whether management knew about the likely shortfall and, if not, why not? If they did, why didn’t they inform the market earlier?

Those taking this harder line feel the management have to explain themselves and convince investors that they are fully in control of the company’s finances. The year-end results in six weeks’ time should make interesting reading.

Conferences helping to make a difference

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BUSINESS tourism tends to play the role of Cinderella in the bigger visitor story but figures just published show that it is making a meaningful contribution to the economy.

The £722,000 accessed from the bid fund administered by VisitScotland has leveraged £71.7 million from conferences and associated business traffic.

VisitScotland is clearly aided by the new facilities in Edinburgh and Glasgow that have given its business tourism unit a strong selling proposition.

If only it could promise continued warm weather.