Leading shares lifted by prospect of a deal with eurozone over Greek debtLeading shares hit a five month high on growing hopes of a resolution to current Greek drama and a surge in mining shares following Australia’s interest rate cut.Among the risers was Barclays, after City analysts said there could be 45p a share worth of hidden value in the business.In the past, non-core units at UK banks have tended to be focussed on non-performing loans. For example, commercial real estate loans and Irish exposures made up a large part of the non-core at of RBS and Lloyds. At Barclays the design of the non-core is somewhat different, with a focus on investment bank assets that are no longer strategic and/or do not generate attractive returns under the new regulatory paradigm, rather than running down non-performing loans. This results in a portfolio that has much lower non-performing exposures and risk weight density than peers’.We calculate the current share price implies a negative value of around 40p a share for non-core, assuming our other (broadly conservative), assumptions hold true. This is effectively capitalising the non-core earnings drag seen in 2015/16 in perpetuity. We argue that the unit actually has a positive net present value of around 8p post 2017 plus, as capital released during the run-off exceeds losses incurred, suggesting a mis-pricing of around 45p or around 20% of market cap.Markets have flung caution to the wind and rallied impressively during [the day’s] session. The bounce in oil, now in its third day and still looking as if it has legs, has certainly helped, but it is Greece that is the source of real optimism. For the first time it looks as if the new Greek government is reacting, rather than driving events. A switch to a more conciliatory tone on the part of the finance minister and the prime minister has raised hopes that a deal may be possible. Added to that is the fact that the Germans have yet to completely dismiss the debt-swap idea, when normally a rejection would be swift and curt. For Capita this is a significant strategic step. First it is a large acquisition for a business that has been targeting total acquisition spend of around £250m annually. Second, it is a material move outside the UK for the first time: Capita has sought in the past to win non-UK clients in particular niches, notably in insurance policy administration. This gives a wholly new platform and growth avenue for the group. There is logic given the scale in the UK and that it builds directly on core expertise and recent success with similar customer groups. Continue reading...
 |
| READ THE ORIGINAL POST AT www.theguardian.com |