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The near 20 percent stake would be disposed of by way of an offering to be managed by book-runners Barclays Capital, Morgan Stanley (NYSE:MS) and Bank of America Merrill Lynch (NYSE:BAC). BlackRock filed a prospectus on Monday.
The transaction also involves a buyback by BlackRock of up to $1 billion of the stock. Barclays came to hold the stock as a result of the 2009 sale of its Barclays Global Investors arm to BlackRock. Another outcome of the deal was that BlackRock holds about 7.1 percent of Barclays.
“All this is just showing how difficult it is for banks to make a profit and sufficient RoE (return on equity) in the new regulatory environment. They are deleveraging or pursuing transactions like this to improve capital ratios,” said Richard Barfield, a director at PricewaterhouseCoopers. Last year, Barclays had to suffer a write-down of 1.8 billion pounds on its stake in BlackRock. The new Basel regulations require higher capital reserves against investments of this type, making it less profitable for banks to hold them.
“From a regulatory capital perspective, we could see more banks selling parts of their business to improve available capital resources,” PwC’s Barfield said.
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