FTSE 100
Dow Jones
Nasdaq
CAC40
Dax

Tuesday, 10 November 2009

Barclays results - yet more smoke and mirrors

Remember the curious asset sale by Barclays to an SPV called Protium reported here? The idea behind this scamtransaction was purportedly to "smoothe profits" by transferring asses that had to be marked-to-market into a company that was 97% funded by a loan from Barclays, the loan being recorded at historic values subject to future impairment valuations.

It turns out that in the Barclays 3rd quarter numbers out today, we see another advantage. The very sensitive values for securities held by Barclays backed by monoline insurers and other crud have all been drastically reduced, becuase they are all sitting in Protium Finance LP. There is no separate breakdown of loans made by Barclays to thinly capitalised companies holding cruddy assets, so as far as reporting goes, these exposures have gone. Ha, ha!

But then Barclays baffles us all by including valuations of assets held by the supposedly independent and unconsolidated Protium Finance. There is some speculation that Barclays have avoided being required to consolidate Protium under IAS 39 because Barclays retain all of the downside risk in the company through the loan but they have given away any upside and hence are able to deconsolidate under IAS even if they can't do the same under US GAAP.

True and fair? Pull the other one.

2 comments:

Anonymous said...

"the loan being recorded at historic values subject to future impairment valuations"!

Shameful - and only slighty less so if the values were the more normal but different "historical"!

Demetrius said...

And the mirrors are cracked.