In U.K. retail banking, for example, Barclays actually expanded its mortgage lending business during the first half. That spells increased market share (more than one-fourth of all net new mortgage lending in the first half!), with many lenders pulling back in this area. Apparently, Barclays isn’t capital-constrained and can act opportunistically in this market -- job well done!
There is the small matter of a £2.4 billion charge
Under normal circumstances, £2.4 billion ($4.7 billion) in impairments and provisions -- almost half of which was due to collateralized debt obligations (CDOs) and other credit exposures -- would be considered disastrous, but these are anything but normal circumstances. In fact, Barclays is more on top of its problems than some of its competitors.
Indeed, Barclays sold £6.3 billion ($12.1 billion) in distressed loans/securities at prices consistent with their carrying value on the bank’s balance sheet and without providing any financing. That suggests the bank has a pretty good handle on the value of its assets.
Compare that to Merrill Lynch
Barclays: what you need to know
If you want to own one of the universal banks, there are certainly worse options than Barclays. It has a number of attractive franchises (U.K. banking, exchange-traded funds) and appears relatively well-managed. In addition, the universal banks look well-positioned to compete with securities firms in the post-credit-crisis environment (commercial banking provides a cheap and stable source of funding).
All the same, I think any firm that is involved in investment banking is subject to regulatory risk right now. As such, there are more attractive opportunities for risk-averse investors (like me!) in other segments of the financial services industry -- U.S. regional banks, for example.
Alex Dumortier, CFA, has no beneficial interest in any of the stocks mentioned in this article. JPMorgan Chase is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days.The Motley Fool has a disclosure policy.
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