Barclays PLC Gets $6bn Lehman Brothers Boost

BarclaysLehman Brothers famously filed for the biggest bankruptcy in US history back in 2008, and the financial world is still immersed in the legal fallout nearly six years on.

But one dispute has been put to bed, after the US Court of Appeals has ruled that Barclays (LSE: BARC) (NYSE: BCS.US) can keep around $6bn of assets it acquired in its purchase of much of Lehman’s brokerage operations when the brokerage arm went into liquidation independently of its parent.

Brokerage assets

Barclays originally gained approval to purchase the brokerage operations from the bankruptcy judges, but the ownership of a number of cash-and-equivalent assets has simmered on. In particular, $4bn in margin assets and $1.9bn in other assets became the subject of competing claims, as trustees acting in the interests of Lehman brokerage clients and other creditors seek to recover as much as possible.

Finally, the control of these assets has been decided in Barclays’ favour, with judge Ralph Winter pointing out: “It would be highly unusual for a buyer to purchase [the brokerage] business in its entirety but not the collateral that allowed that business to exist.

What does it mean?

Perhaps surprisingly, investors do not appear to have been too impressed by the news, with Barclays shares down 5.7p (2.6%) by mid-morning to 216p — although as the latest judgment actually upholds an earlier 2012 ruling, maybe the real surprise would have been if it had gone the other way.

Barclays itself had not made any comment at the time of writing.

Against the current mood amongst regulatory bodies for seeking comeback against the world’s banks, and the risks of further fines for unsavoury activity always a possibility, it’s hard to say what this one victory will do for Barclays’ longer term prospects.


But on fundamentals, the shares are still looking cheap to me. With more than 25% per year growth in earnings per share forecast for this year and next, the shares are on a forward P/E of a little over 10 for 2014, dropping close to eight for the year after. And there are very well covered dividends yielding 3.3% this year and 4.5% next on the cards too.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.