In interesting news on UK stocks, banking behemoth Barclays plc (GB:BARC) is shoring up its capital by selling credit card debt to American alternative investment company Blackstone (NYSE:BX). Barclays is selling a bundle of its credit card receivables worth $1.1 billion in the U.S. to Blackstone Credit & Insurance. The move will reduce Barclays’ risk-weighted assets (RWA) by roughly £1 billion, enabling the bank to enhance liquidity and lend more.
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Details About the Deal
As per the deal, Barclays will continue to hold the legal title to the accounts and will service them for a fee, maintaining the premium quality that clients expect. The deal is expected to be funded in the first quarter of this year. Blackstone is making the investment on behalf of its insurance clients. Barclays Bank plc is also expected to invest in the transaction.
The FTSE 100-listed bank recently announced that it is seeking strategic ways to reduce its RWA and boost liquidity. Barclays projects that its RWA will increase by £50 billion in the future, with about £20 billion allocated to the U.S. consumer bank. As per banking regulations, a bank has to hold enough capital to cover its RWA, thus tying up its lending ability. By reducing the RWA, a bank can free up liquidity to give out more loans to customers.
Commenting on the first deal in its U.S. cards book, Anna Cross, group finance director at Barclays said, “We said that we would leverage strategic partnerships to execute risk transfer agreements to reduce capital requirements.”
Is Barclays a Good Buy Now?
Recently, RBC Capital analyst Benjamin Toms lifted the price target on BARC shares to 265p from 230p while maintaining a Buy rating.
With eight Buys versus one Sell rating, BARC stock commands a Strong Buy consensus rating on TipRanks. The Barclays plc share price forecast of 224.38p implies 34.5% upside potential from current levels.
