Short View: The free and the fettered

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Spring is the season of renewal and rebirth, so it is fitting that both Barclays Bank in the UK and Goldman Sachs in the US have chosen this time to play the hands they hope will end any potential obligation to their governments.

No doubt both are acting for similar reasons: to preserve their autonomy to act – and to pay themselves – in whatever way they see fit while reinvigorating their ability to exploit a competitive advantage over more hamstrung rivals.

But what have investors made of the good news? It is early days, but the responses in their equity and credit securities versus those of state-dependent rivals do not scream success.

On the equity side, Barclays did better. Its stock rose 12.5 per cent last Thursday when it sold iShares and has kept going, finishing on Wedneday at 196.8p, or 25 per cent up since the deal.

Goldman has not fared so well. Its stock dropped 11.6 per cent on Tuesday before recovering some of that early Wednesday but was still 8.75 per cent lower this week. Here the prospect of freedom from the US government is offset by the dilutive $5bn share sale needed to repay troubled asset relief programme funds.

Compare these to stock moves for Citigroup in the US and Royal Bank of Scotland in the UK, and we see little beyond the fact that investors in Goldman and Barclays at least have reasons to trade.

But where equity investors are forward-looking and prone to bouts of mania or deep gloom, credit markets are usually more focused on today’s profits, cash and capital.

In credit derivatives markets, relative performance shows that investors see no reason to discriminate between the free and the fettered. In a sense this is positive for Barclays and Goldman because it means no panic to any potential support.

But the lack of any great fillip compared with rivals shows they both still have much to prove.

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