Alert! British Bank Steals U.S. Broker / I-Bank!

An unnamed large institutional holder of Barclays complains about the Lehman deal to Reuters: "Does Barclays not have better things to do with its capital? I don’t think it’s an environment for banking people to be brave."

Is the man serious? Barclays will pay $250 million for Lehman Brothers’ North American securities unit, or 0.5 times what just the investment banking side earned  in the first half of 2008, annualized.  Even assuming some revenue leakage, much less than in typical i-bank acquisitions, this is a Hall of Fame deal from day one.  The payback on investment could be a matter of months, not years.

Put differently, and per a Bloomberg story, that $250 million means Barclays is acquiring the Lehman banking and trading franchises for less than one-third of  KBW’s current market cap, and the one times the market cap of a regional brokerage named Sanders Morris, out of Houston. As part of the full, $1.75 billion package, Barclays also gets Lehman’s Manhattan headquarters, worth $600 million to $1 billion, along with data centers and related real estate, and $72 billion in trading assets, against $68 billion in trading liabilities. Barclays will also get $2 billion in negative goodwill, which means the deal will provide immediate capital relief (the $2 billion is against $15 billion in risk-weighted assets). 

So, to answer the holder’s question, no, there aren’t many better things Barclays--or anyone--might have done with its capital. . . .