WHEN: TODAY, TUESDAY, MARCH 31
WHERE: CNBC'S "CLOSING BELL WITH MARIA BARTIROMO"
Following is the unofficial transcript of a FIRST ON CNBC interview with Barclays Bank President Robert Diamond today on CNBC's "Closing Bell with Maria Bartiromo."
All references must be sourced to CNBC's "Closing Bell with Maria Bartiromo."
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ROBERT DIAMOND: OVER THE LAST COUPLE OF WEEKS OR ACTUALLY THE LAST MONTH OR SO, THE TRIPARTIDE HAS IMPOSED A STRESS TEST ON THE UK BANKS. THAT HAS BEEN MANAGED BY THE FSA. AND OVER THE LAST FEW WEEKS WE HAVE TAKEN PART IN THAT. AND THAT'S LOOKING AT A VERY SEVERE 1980s TYPE RECESSION OVER A LONGER PERIOD OF TIME AND IT LOOKS AT YOUR CAPITAL RATIOS IN 2009, 2010, 2011. AS A RESULT OF THAT VERY, VERY SERIOUS STRESS. I THINK THAT'S THE RIGHT THING TO DO. AND OUR UNDERSTANDING IS THAT'S GOING TO HAPPEN IN THE U.S. AS WELL. AS A RESULT OF THAT, THERE WASN'T ANY REQUIREMENT FOR THE ASSET PROTECTIONS SCHEME, BUT JOHN WAS ADAMANT FROM THE BEGINNING THAT IT'S IN EVERYONE'S BEST INTEREST THAT WHETHER OR NOT IT'S MANDATORY, THAT WE SHOULD LOOK - TAKE A LOOK FROM THE POINT OF VIEW OF OUR SHAREHOLDERS, IS THERE A WAY FOR US TO PARTAKE FOR A SMALL PORTION AROUND SOME ASSET CLASSES ON ECONOMIC TERMS.
AND WE LOOKED AT THAT. WE TALKED WITH THE TREASURY. WE CONSULTED WITH OUR SHAREHOLDERS. AND THE CONCLUSION WAS IT DIDN'T MAKE SENSE.
MARIA BARTIROMO: YOU LOOKED AT IT AND RECOGNIZED THAT YOU WOULD BE GIVING UP A LOT BY PARTICIPATING, RIGHT?
THAT WOULD HAVE MEANT AN OWNERSHIP STAKE TO BE GIVEN OUT TO THE GOVERNMENT OR, TELL ME WHAT THE IMPLICATIONS WOULD HAVE BEEN.
DIAMOND: WE DIDN'T NECESSARILY GET TO THAT POINT. BUT CERTAINLY IF THE STRESS TEST RESULTS WERE DIFFERENT AND IF THE ASSET PROTECTION SCHEME WERE MANDATORY, IT DEFINITELY MEANT GOVERNMENT INVESTMENT INTO BARCLAYS. AND AS JOHN VARLEY AND MARCUS AND I HAVE SAID FROM THE BEGINNING, THERE'S NO REASON FOR US TO BE A BURDEN ON THE TAXPAYER.
WE KNOW OUR CAPITAL'S STRONG. WE KNOW OUR BUSINESS IS GOOD. LISTEN, THIS HAS BEEN AS DIFFICULT AN ENVIRONMENT AS I EVER COULD HAVE IMAGINED US WORKING THROUGH. BUT WE HAD STRONG PROFITABILITY IN BOTH 2007 AND 2008 AS A GROUP, NOTWITHSTANDING A DIFFICULT ENVIRONMENT AND NOTWITHSTANDING SOME PRETTY SIGNIFICANT WRITEDOWNS IN SOME OF OUR LEGACY ASSETS. SO THERE'S NO REASON FOR US TO TAKE THAT STEP.
BARTIROMO: YET, THERE ARE STILL PEOPLE OUT THERE WHO SAY, LOOK, BARCLAYS NEEDS TO RAISE NEW CAPITAL. WHAT DO YOU SAY TO THAT?
DIAMOND: IT'S AN ENVIRONMENT WHERE WE HAVE A LOT OF PEOPLE MAKING OPINIONS ON A LOT OF DIFFERENT FINANCIAL INSTITUTIONS. IT'S PART OF THE CONFERENCE WE DID TODAY. CHRIS LUCAS, OUR CHIEF FINANCIAL OFFICER, REMINDED PEOPLE THAT WE MADE 7 BILLION POUNDS IN PROFITS IN '07, 6 BILLION POUNDS IN PROFITS IN '8 DURING VERY, VERY DIFFICULT TIME. AND OUR LOSS ABSORPTION CAPABILITY TODAY IS 24 BILLION POUNDS POST TAX BETWEEN OUR CAPITAL RATIOS PRO FORMA WHEN OUR MANDATORY CONVERTIBLES CONVERT IN JUNE AND THE REGULATORY MINIMUM. THAT'S A VERY, VERY SIGNIFICANT -- SO WHAT WE SAY IS THAT WE HAVE BEEN TRANSPARENT WITH THE MARKET ON POSITIONS, ON CAPITAL. WE RECOGNIZE AND HAVE RECOGNIZED SINCE JULY '07 WHEN THIS CRISIS IN THE FINANCIAL SYSTEM BEGAN THAT BANKS ARE GOING TO OPERATE WITH MORE EQUITY. BANKS ARE GOING TO OPERATE WITH LESS LEVERAGE, AND BANKS ARE GOING TO OPERATE IN A MORE INTRUSIVE AND INTEGRATED REGULATORY ENVIRONMENT. THAT HASN'T CHANGED. IT JUST CHANGED IN DETAIL.
BARTIROMO: CAN YOU CATEGORICALLY SAY YOU WON'T HAVE TO RAISE MORE CAPITAL THIS YEAR?
DIAMOND: I DON'T THINK ANYONE WOULD SAY ANYTHING CATEGORICALLY. BUT THAT'S CLEARLY NOT THE PLAN. AND WE'VE SAID THAT CONSISTENTLY.
BARTIROMO: WHERE IS THE BUSINESS COMING FROM TODAY? CAN YOU CHARACTERIZE THE ENVIRONMENT FOR US?
DIAMOND: YOU KNOW, BUSINESS IS GOOD. I SPOKE THIS MORNING AT THECONFERENCE ABOUT INVESTMENT BANKING AND BARCLAYS CAPITAL.
AND IF YOU LOOK AT THE INTEGRATION OF BARCLAYS CAPITAL WITH THE U.S. LEHMAN BUSINESS, THE NEW INTEGRATED BARCLAYS CAPITAL IS IN A BETTER POSITION THAN WE EVER COULD HAVE IMAGINED. EVERY BANK IS CONTINUING TO RID THEMSELVES OF LEGACY ASSETS. AND I THINK WE'RE MORE THAN HALFWAY THROUGH THAT PROCESS. BUT IF YOU CAN PUT THAT ASIDE FOR A SECOND, FOR THOSE BANKS, FOR THOSE INVESTMENT BANKS THAT HAVE KEPT THEIR TALENT, THAT HAVE KEPT THEIR MANAGEMENT, THAT HAVE STAYED FOCUSED ON CLIENTS, THAT HAVE MANAGED THE LEGACY ASSETS, THAT HAVE STAYED PROFITABLE, ARE DOING A HIGHER QUALITY BUSINESS AND MORE BUSINESS AND EARNING MORE REVENUES IN THE FIRST QUARTER OF 2009 THAN THEY HAVE IN THE PAST, ONE OF THE SLIDES I SHOWED THIS MORNING WAS THE BUSINESS THAT WE'RE DOING IN FOREIGN EXCHANGE, IN FIXED INCOME AND IN THE U.S. ON A REGIONAL BASIS.
IN Q1 '09 VERSUS Q1 '07. WE KNOW '07 WAS THE VINTAGE QUARTER FOR INVESTMENT BANKING. SIGNIFICANTLY UP ON CLIENT FLOWS IN THE FIRST QUARTER OF '09 VERSUS THAT PERIOD. IF WE LOOK BEYOND SOME OF THE DIFFICULTIES AND THEY'RE REAL AND WE CAN LOOK BEYOND THE MANAGEMENT OF THE LEGACY ASSETS THERE'S A LOT OF FUNDAMENTAL CLIENT BUSINESS THAT NEEDS TO GET DONE.
BARTIROMO: HOW WOULD YOU CHARACTERIZE CAPITAL MARKETS AND BUSINESS TODAY?
DIAMOND: IF YOU LOOK AT INVESTMENT GRADE DEBT, CORPORATE ISSUANCE OF DEBT, WE'RE -- VOLUMES WERE 20% DOWN FROM THE PEAK IN 2008. OUR MARKET SHARE WENT FROM 5% TO 9%. SO IT'S A GREAT INCREASE. PART OF THAT WAS THE GROWTH OF BAR CAP. PART OF THAT CAME WITH THE ACQUISITION OF LEHMAN BROTHERS. BUT IN THE FIRST QUARTER OF THIS YEAR, ISSUANCE WAS MORE THAN DOUBLE WHAT IT WAS IN THE SAME PERIOD IN '08. SOME PEOPLE FEEL THAT 2009 COULD BE A RECORD YEAR FOR ISSUANCE IN INVESTMENT GRADE DEBT.
BARTIROMO: PART OF THE STRESS TEST LOOKED AT HOW BARCLAYS WOULD PERFORM IF THE RECESSION LASTED TWO YEARS OR BEYOND AND IF WE WERE TO SEE A WORSENING OF COMMERCIAL REAL ESTATE AND, OF COURSE, CONSUMER HOUSING PRICES. WHAT ARE YOUR EXPECTATIONS ABOUT HOW LONG THIS LASTS?
DIAMOND: WE JUST PUT A RESEARCH PIECE OUT THIS WEEK SHOWING SOME SIGNS OF HOPE IN THE U.S., IN CHINA, THAT WE'RE SEEING SOME SIGNS OF HOPE FOR PROGRESS IN 2009, MAYBE TOWARD THE END OF 2009.
BARTIROMO: AS FAR AS THAT PUBLIC-PRIVATE PLAN TO ACQUIRE THE TOXIC ASSETS, WHAT ARE YOU EXPECTING? A LOT OF PEOPLE SAY, LOOK, THE PRICING IS THE MOST DIFFICULT PART OF THIS BECAUSE YOU DON'T WANT TO SELL THOSE ASSETS AT A LEVEL YOU BELIEVE YOU CAN GET MUCH HIGHER DOWN THE ROAD. SO HOW WILL THAT PLAY OUT?
DIAMOND: I THINK ALL OF THE BANKS KNOW WHERE THESE ARE PRICED, HAVEMARKED THEM TO THE APPROPRIATE LEVELS. THE ISSUE IS FREEING UP THE REGULATORY CAPITAL, WHICH IS HELD AGAINST THE ASSETS THAT MOST BANKS, OURSELVES INCLUDED, WOULD PREFER TO SELL INTO THE MARKET. SO IF THIS PROGRAM OF PUBLIC AND PRIVATE PARTNERSHIP CAN BRING NEW MONEY TO BUY THESE ASSETS AT THE APPROPRIATE PRICES AND CREATE KIND OF A SECONDARY MARKET SO THAT THESE ASSETS CAN MOVE OFF, IT'S NOT AS MUCH ABOUT THE RISK BEING REMOVED FROM THE BALANCE SHEETS IN MY MIND AS IT IS ABOUT FREEING UP REGULATORY CAPITAL, ALLOWING BANKS TO DO MORE NEW BUSINESS AND TO BUILD THEIR CAPITAL RATIOS.
BARTIROMO: IS IT A BLACK HOLE OR CAN YOU SAY THAT YOU HAVE A COMFORT FEELING IN TERMS OF HOW BAD THE TOXIC ASSET SITUATION IS ON THE BOOKS? SOME PEOPLE SAY BANK EXECUTIVES DON'T EVEN KNOW, WHICH I FIND SO HARD TO BELIEVE AT THIS POINT IN TIME.
DIAMOND: IN JULY '07 WHEN WE KNEW THIS WAS GOING TO BE A DIFFICULT PERIOD -- WE DIDN'T KNOW HOW DIFFICULT IT WILL BE. I WILL SPOT YOU. BUT ONE OF THE THINGS I SAID THEN AND I SAY NOW IS THERE'S NOT A SINGLE RISK ON THE BOOKS AT BARCLAYS THAT WE DIDN'T KNOW ABOUT THEN. AND SO IT'S COME DOWN TO HOW DO YOU MANAGE IT, HOW DO YOU HEDGE IT, HOW DO YOU LIQUIDATE IT. HOW DO YOU PROTECT IT FROM THE ONGOING BUSINESS. HOW DO YOU RELEASE THE REGULATORY CAPITAL. I THINK AS FAR AS THE INVESTMENT BANKS AROUND THE WORLD I AGREE WITH YOU I THINK THE BANKS KNOW WHERE THEIR RISK IS; KNOW WHERE THEY'RE HAVE VALUED BY AND LARGE AND LOOKING TO SELL THEM INTO THE MARKET. IF PPIP CAN ACCELERATE THAT, TERRIFIC. I THINK WHERE THE MARKET WORRIES MORE IS RETAIL SELLING ASSETS. IN THE EVENT OF A MORE SERIOUS AND SEVERE DOWNTURN, WHAT WOULD THE CONSUMER PORTFOLIOS AND THE CORPORATE BANKING PORTFOLIOS LOOK LIKE? THAT'S THE GENESIS OF THE STRESS TEST WE'VE GONE THROUGH RIGHT HERE IN THE UK. AND CERTAINLY WE WEREN'T SURPRISED AT BARCLAYS AT THE RESULTS, BUT IT -- FRANKLY, IT'S NICE TO SEE THEM PUBLIC, THAT GIVEN THE SIGH OF OUR BUSINESS IN RETAIL AND COMMERCIAL BANKING THAT THE STRESS TEST IS BEHIND US.
BARTIROMO: WHEN ARE YOU EXPECTING TO ANNOUNCE THE SHARE OF I-SHARES?
DIAMOND: WE REALLY CAN'T SAY ANYTHING PUBLIC. THIS HAS BEEN A VERY, VERY DIFFICULT DECISION FOR US IN BARCLAYS. IT'S AN UNBELIEVABLE BUSINESS, I-SHARES. WE'VE GROWN IT FROM A BABY. IT WAS ALL ORGANIC FROM DAY ONE OVER THE LAST FIVE TO SIX YEARS. WE HAD SOME OUTSIDE INTEREST IN THE BUSINESS. AND WE ALSO HAD A DEBATE INTERNALLY. THE I-SHARES BUSINESS HAS A MUCH DIFFERENT DISTRIBUTION MEDIUM THAN OUR INSTITUTIONAL BUSINESS IN BGI OR BARCLAYS CAPITAL. IT'S REALLY SOLD THROUGH INTERMEDIARIES ON TO RETAIL INVESTORS. SO WE HAVE STRUGGLED WITH WHETHER OR NOT THERE'S A SEPARATION BETWEEN THE I-SHARES AND THE INSTITUTIONAL BUSINESS OF BGI. IT DID LEAK THAT WE'RE IN DISCUSSION, SO WE CONFIRMED THOSE. I THINK WE'VE SAID ANYTHING SINCE THEN.
BARTIROMO: SO YOU WOULDN'T -- WOULD YOU CONSIDER SELLING THE ENTIRE BGI OR JUST THE I-SHARES BUSINESS? I MEAN, THE GLOBAL CAPITAL BUSINESS?
DIAMOND: THE ONLY DISCUSSIONS WE'VE HAD HAVE BEEN AROUND THE I-SHARES BUSINESSES. AND AS I SAID, BGI IS A CORE BGI OR BGI BEFORE THE GROWTH OF I-SHARES WAS PURELY INSTITUTIONAL, MUCH AS BARCLAYS CAPITAL IS. THE I-SHARES BUSINESS IS REALLY A RETAILER INTO BUSINESS. THAT'S THE ONLY DISCUSSIONS WE HAD.
BARTIROMO: I'M SURE IT'S DIFFICULTBECAUSE IT'S A VERY PROFITABLE BUSINESS. WHY DO IT? TO RAISE THE CAPITAL?
DIAMOND: I THINK A COUPLE OF REASONS. IF WE HAD ANYTHING IN OUR GROUP THAT WAS CLEARLY NOT STRATEGIC AND WE HADN'T ALREADY SOLD IT IN THIS ENVIRONMENT, SHAME ON US. I THINK THIS WAS A MUCH MORE HAD DIFFICULT DECISION. WE SAW VERY STRONG INTEREST AND DEMAND EXTERNALLY AND WE'RE WRESTLING INTERNALLY WITH THE FIT IN TERMS OF A RETAIL BUSINESS ALONGSIDE AN INSTITUTIONAL BUSINESS. I THINK ALL OF THOSE THINGS CAME TOGETHER AND WE MADE THE DECISION TO PURSUE THE OPPORTUNITY.
BARTIROMO: AS FAR AS INVESTING TODAY, A LOT OF PEOPLE NOW TALKING ABOUT ASIA REALLY THE PLACE. WHAT CAN YOU TELL US ABOUT THE INPUT COMING OUT OF CHINA TODAY?
DIAMOND: WELL, YOU KNOW, I THINK TWO YEARS AGO WE WOULD HAVE SAID WHEN WE LOOKED FOR INVESTMENT OPPORTUNITIES, WE LOOK EAST, NOT WEST. FIRST OF ALL, I WOULD SAY TODAY THAT THERE'S OPPORTUNITIES EVERYWHERE. WE NEVER WOULD HAVE EXPECTED TO BE ABLE TO BUY THE LEHMAN BROTHERS U.S. BUSINESS. BUT WE DO LOOK AT CHINA. WE'RE DOING VERY WELL WITH CHINA DEVELOPMENT BANK.
I JUST GOT BACK FROM A TRIP WHERE I SPENT TIME WITH CIC AND CHINA DEVELOPMENT BANK. AS I SAID EARLIER, I THINK THAT THE ECONOMY IN CHINA HAS SOME SIGNS OF IMPROVEMENT. IF THAT'S CORRECT AND WE SEE SOME RECOVERY IN TERMS OF THE ECONOMY IN CHINA BEFORE THE END OF 2009, THAT BODES VERY WELL FOR THE OTHER STRONG ECONOMIES IN TERMS OF HELPING THEM LEAD THE ECONOMIC RECOVERY.
BARTIROMO: WHAT CAN YOU SAY ABOUT THE ENVIRONMENT TODAY?
DIAMOND: MARIA, IT'S DIFFICULT AN ENVIRONMENT AS ANY WE'VE WORKED IN. FOR ALL OF US AS BANKERS, IT'S A PERIOD WHERE WE TRY AND FOCUS AS MUCH AS WE CAN ON STAYING CLOSE TO OUR CLIENTS AND MANAGING THE RISKS AND KNOWING THAT MUCH OF THIS RHETORIC WILL PASS BUT, ALSO, RECOGNIZING THAT WE'VE ALL MADE MISTAKES DURING THIS PROCESS. I THINK TO ME THE SINGLE MOST IMPORTANT THING IS THIS. IF THERE'S ANY OPPORTUNITY, IF THERE'S ANY CHANCE FOR THE ECONOMY IN THE U.S. AND THE UK TO RECOVER, IT'S ONLY GOING TO HAPPEN WITH A STRONGER, MORE HEALTHY, MORE CONFIDENT FINANCIAL SYSTEM. AND I THINK IT'S BEGINNING TO DAWN ON PEOPLE THAT, FRANKLY, WE'RE ALL IN THIS TOGETHER.
BARTIROMO: AND MY THANKS TO BOB DIAMOND OF BARCLAYS.
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