Barclays' Plan B: No Better Than Plan A

Is Bob Diamond delusional?

Barclays' top team feels it has earned kudos with the City by walking away from last year's battle for ABN Amro, which was bought by a consortium led by RBS for £47bn.

Um, walking away? That's one way of putting it. Or you could say that the value of Barclays' stock-based bid plunged with Barclays' share price, and that there was no way that Barclays could ever compete with the RBS consortium, which had much more in the way of synergies.

In any event, you'd be hard-pressed to find an investor showering Barclays with kudos right now: the bank's shares are trading at 406p, down from 790p immediately before the ill-fated bid for ABN Amro. That's not the kind of share-price performance which gets a lot of investors on the side of management.

According to Katherine Griffiths of the Telegraph, Barclays is now thinking about yet another takeover bid, and there's a ridiculously wide range of possible targets: Lehman Brothers, UBS, Alliance & Leicester. What that means is that Barclays doesn't have a strategic plan right now, and that it's going to come up with one after deciding whether to bid on another bank, and if so which bank to bid on.

Such ex-post rationalizations are easy to come by, but they almost never get applauded in the stock market. Any takeover bid would be great for the shareholders of the target company, but it would be very unlikely to be welcomed by the long-suffering owners of Barclays.