Do Investors Want UK Banks To Move Abroad?

The mooted move of HSBC’s headquarters from London to Hong Kong has been one of the most enduring tales of the post-financial crisis era, despite none of it really being news. And now Barclays has joined the party, with UBS cheering it on from the sidelines.

Indeed, the idea of a Barclays move first claimed popular attention when UBS issued a research note in which it argued that Barclays was too big for Britain. 

Almost immediately, the mayor of New York, Michael Bloomberg, threw open his arms to welcome Barclays. Bloomberg news quoted Mayor Bloomberg as saying: ‘I had not known it had gone from considering to confirming that it’s moving here. I hope it moves here. That would be great for us.’  

But had Barclays really already made this decision? Indeed, had anyone even asked Barclays what its plans were? Well, yes, at least by the day after the UBS note was published, when CEO Bob Diamond responded that London was where the bank wanted to be. ‘Of course, it’s our obligation on behalf of our shareholders to look at the alternatives, but this is home and where we want to stay,’ he maintained.

The UBS note, by banking analysts John-Paul Crutchley and Alastair Ryan, was based on the contention that Barclays had become too big to fail in the UK. According to the analysts’ calculations, the bank’s gross balance sheet, including full derivative positions, is 100 per cent of UK GDP. 

They argue that Barclays’ shareholders are really faced with two options: either they ‘effectively force a change of strategy upon management that forces Barclays to reduce its balance sheet and free up capital for distribution to shareholders; or Barclays’ management is pressured into relocating the business…’ 

Crutchley and Ryan go on to suggest that such relocation would most likely be in conjunction with ‘some corporate activity’.

Read the rest of this article at IR magazine >>