Barclays, Royal Bank Lose Shareholders' Confidence

Barclays Plc's John Varley and Fred Goodwin of Royal Bank of Scotland Group Plc, who spent six months battling for control of ABN Amro Holding NV, now have something else in common: their banks are among the cheapest in Europe.

Investors drove Barclays and Royal Bank shares down more than 25 percent in the past month on concern potential losses linked to the U.S. subprime mortgage market will hurt profits. Edinburgh- based Royal Bank trades at 5.8 times estimated earnings, the lowest in at least six years, and London-based Barclays is at 6.9 times profit. That compares with the average multiple of 9.9 for the 63-member Bloomberg Europe Banks and Financial Services Index.

The stocks got battered because Chief Executive Officers Varley and Goodwin have provided little information to investors after record foreclosures on U.S. home loans to borrowers with poor credit histories roiled credit markets. The world's biggest financial institutions, including Citigroup Inc. in New York and Zurich-based UBS AG, reported about $45 billion of losses and writedowns, according to company reports.

``There's no point in arguing about valuations when people are so nervous,'' said Stuart Fowler, who oversees about $26.8 billion, including Barclays and Royal Bank, as head of U.K. equities at Axa Investment Managers in London. ``Under current conditions, you don't know they are cheap. One wouldn't expect massive writedowns, but only time will tell.''

Barclays shares rose 16.5 pence, or 3.5 percent, to 491 pence by 8:47 a.m. on the London Stock Exchange after Varley denied speculation about subprime-related losses following the close of trading on Nov. 9. Royal Bank shares rose 2 percent to 411 pence.

Too Much Silence

`If there were any substance in the rumors that I have been hearing in recent days, we would have been required to have made an announcement to the stock market,'' Varley said in a memo to staff. ``But we have not. That silence says a lot.''

Silence has been part of the problem, said Colin Morton, who helps oversee $27 billion at Rensburg Sheppards Plc in Leeds, northern England. Investors are in the dark because U.K. banks report earnings twice a year, rather than quarterly as in the U.S., Germany, France and Switzerland. Barclays and Royal Bank, the second-largest in the U.K., should disclose more details to reassure investors, Morton said.

``We don't know what is out there,'' said Morton. Rensburg Sheppards held about 26 million Barclays shares, or 0.4 percent, at the beginning of September, data compiled by Bloomberg show.
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