Barclays has strong start to '09, may sell iShares

[March 16, 2009]  LONDON (AP) -- Barclays PLC said Monday it has had a good start to 2009 and confirmed it has been in talks with several parties about selling iShares, its San Francisco-based asset management unit.

"Barclays businesses continue to perform well and have had a strong start to 2009," the company said, without specifying further.

Despite the upbeat statement, the bank confirmed it would was considering divestments to boost its capital reserves as well as possibly joining the government's insurance plan for bad assets.

News reports over the weekend said Barclays was looking to raise cash to avoid giving the government a stake in the company -- the cost for participating in the state insurance program.

"No decision regarding the disposal of any business has been taken by the board of Barclays," the company said in an announcement to the London Stock Exchange.

"The sale talks are somewhat of a surprise as management had indicated this business as being core to group for several years now," said Alex Potter, analyst at Collins Stewart. "However, tough markets evidently lead to tough decisions being taken."

Barclays shares rose 13.9 percent to 84.4 pence on the London Stock Exchange.

The Financial Times said a sale of iShares could net Barclays anywhere from 3 billion pounds to 5 billion pounds.

The Financial Times and other reports suggested that Barclays was interested in selling part of its stake in iShares, although the company merely referred to a "disposal of iShares."

The company also confirmed it was negotiating with the Treasury and the Financial Services Authority about participating in the insurance program, which covers potential losses on assets for which there is no longer a market due to the credit crunch. Such assets may be complex financial instruments based on the collapsed U.S. subprime mortgage market.

March 31 is the deadline for signing up the program.

"Barclays' decision whether and to what extent to participate in the scheme will be based on the economic merits to shareholders of any such participation," the company said.

Sandy Chen, analyst at Panmure Gordon & Co., said the announcement reinforced concerns about Barclays.

"The contemplated disposal of iShares, the continued wrangling over the (Asset Protection Scheme), and the disclosure of significant credit derivatives-related payouts from troubled counterparties all reinforce our view that Barclays' risk profile is high," Chen said in a research note.

Chen said iShares, with an estimated 226 billion pounds in assets under management, accounted for less than a quarter of Barclays Global Investment operation. However, it is believed that iShares contributes more than half of the division's profits because of its high margins.

Chen rated Barclays shares as a "sell" but Potter rated it a "hold."

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On the Net:

http://group.barclays.com/

[Associated Press; By ROBERT BARR]

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