Barclays Back in Lehman Mix

LONDON (Reuters) – British bank Barclays is in talks with Lehman Brothers to buy its core U.S. broker-dealer business, including equity, fixed income, M&A advisory and other parts, people familiar with the matter said.

A deal could save thousands of jobs and many of Lehman’s core investment bank operations, a day after the U.S. bank’s holding company filed for bankruptcy protection.

Barclays said on Tuesday it was in talks to buy some of Lehman’s assets on terms that would need to be attractive to its shareholders. It declined to comment further.

The talks mainly involve the core U.S. business, which has 8,000 to 10,000 staff, but could include some of its global businesses, the sources said.

It does not include Lehman’s asset management and wealth management arms.

The sources said there is an urgency to the talks as a deal would need to be struck before staff and clients leave and damage the franchise.

A deal would include staff, infrastructure, licenses and some of Lehman’s financial positions, but would not leave the UK bank exposed to Lehman’s troubled assets, the sources said.

Barclays was involved in frantic talks over the weekend to rescue Lehman, but quit after U.S. authorities would not guarantee the U.S. investment bank’s trading obligations.

That prompted Lehman’s New York-based holding company to file for Chapter 11 bankruptcy protection, sending shockwaves around world financial markets as a year-long credit crunch claimed another, bigger victim.

Bank shares tumbled on Monday amid fears of more collapses and higher borrowing costs, and Europe’s top banks extended losses on Tuesday.

By 4 a.m. EDT, Barclays shares were down 5.5 percent at 298.5 pence, valuing the bank at 27 billion pounds ($47.53 billion). The DJ Stoxx European bank index fell 3.4 percent.

By Steve Slater and Lorraine Turner
(Editing by Quentin Bryar)