Barclays(LSE: BARC) (NYSE: BCS.US) announced today the sale of itsretail, wealth management and corporate banking businesses in Spain to peerCaixabank for a total consideration of 800m. In addition, the bank announced today the sale of its UAE Retail Banking business to Abu Dhabi Islamic Bank.
These sales are part of Barclays long-term plan, designed to shrink the bank down to its core operations. Whats more, the disposal ofthese businesses have raised some much needed capital for the group, which should help Barclays meet its targeted capital ratios.
Unfortunately, Barclays has revealed that it is likely to report a post-tax loss of 500m on the sale of the Spanish business. However, managementestimatesthat the sale of the UAE business will generate a pre-tax gain of 119m so its not all bad news.
Moreover, as well as receiving around 750m from the sales of the two businesses, Barclays is expecting to reduce its leverage exposure by around 15bn. Including the cash from the sale, Barclays balance sheet will be more than 16bn stronger after the deal completes.
This is great news for Barclays shareholders, as the strength of the banks balance sheet has been of concern for some time.
The sale of Barclays Spanish business is part of Barclays long-term plan exit non-core businesses around the world. The non-core cluster as it is known is a selection of businesses around the world that Barclays is trying to sell off, in an attempt to reduce risk and increase performance.
That said, Barclays has not divested its whole Spanish business. The banks well-known Spanish Barclaycardoperations and investment bank were not included in the deal.
So, the good news for investors is that management has only sold off the worst parts of the Spanish operation, keeping the lucrative Barclaycard brand within Spain under the Barclays umbrella.
Time to buy?
This news does boost the investment case for Barclays. While the bank does stand to report a loss from the transaction, the reduction in leverage is a long-term positive. Further, retreating from the UAE will almost certainly reduce Barclays regulatory burden, which is likely to push down costs.
Still, as usual,I strongly recommend that you conduct your own analysisbefore you make any trading decision. Indeed, Barclays does look to be a better investment after todays deal, although over the longer term, the bank has plenty of work to do before it can be considered to have returned to health.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.