WHAT happened to Barclays last week highlights just how divided opinion is - not just about the confidence in this bank, but the wider financial sector.

John Varley, Barclays’ chief executive, unveiled a £4.5 billion placing backed by some heavyweight overseas instututions and signed off by Credit Suisse and JP Morgan Cazenove. The capital raising was a vote of confidence. Barclays said the interim dividend will be held and, as the bank is not an exponent of scrip dividends, the full-year payout is also likely to be held.

The shares now yield 11% and trade on a price-earnings ratio of 4.5 and the bank’s balance sheet has been strengthened. Yet on Friday some 100m shares were traded, suggesting a lot of investors still don’t believe Barclays is out of the war zone. Analysts at Citigroup estimate it needs to raise a further £6.6 billion to build its cash cushion to match Royal Bank of Scotland, or by £8.6 billion to meet the standards of its European competitors. The critics say that however confident Barclays’ board is about future prospects, it is unable to see what troubles lie ahead. And on the basis of the upheavals in global markets, a lot of investors reckon it isn’t worth hanging around to find out.

On any historical basis, Barclays shares now look cheap as chips, yet the volume of share sales shows such optimism should be tempered. If the analysts’ note at Citi is only 50% wrong, it is still a big number to find. There is a view, though, which I share, that the future for Barclays is sufficiently compelling to outweigh the short-term issues.

The banking environment is tough and prospects uncertain, but Barclays, along with its investment arm Barclays Capital, is now presented with a generational opportunity to become one of the top five bulge-bracket banks on Wall Street. And it can achieve this within three years.

The upheaval seen in American banking in the past 12 months is unprecedented. Sector giants like Citi, Bear Stearns, Merrill Lynch and Lehman Brothers have been badly battered. As a result Barclays Capital has already moved up to become one of the top three players in foreign exchange.

If you want to become a big player in financing and risk management, you have to crack Wall Street. America has been a graveyard for a number of British banks, but Varley and Bob Diamond, head of Barclays Capital, believe it is a risk that is worth taking. They believe the bank’s track record demonstrates this. Since 2002 revenues at Barclays Capital have grown from £2.2 billion to £7.1 billion and staff numbers have risen from 5,000 to 16,000. Some 15% of Barclays’ profits now come from America and that could rise to 20%.

Varley is confident the Citi analysts’ note lacks rigorous analysis. Let’s hope he is right. Varley has been unswerving in his belief that Barclays will emerge from this credit crisis better than its peers. If so, the opportunity is there for the taking, and he has the depth of management to achieve it.

Doling out trouble

THE big question that is spooking the City is, how much damage has been done to the wider economy by the credit crunch and how has it affected employment? People have memories of the last recession, when the claimant count nearly doubled from 1.6m to almost 3m, shattering consumer confidence and prolonging the downturn in retailing and housing.

So far, economists do not expect a repeat, though they do expect a rise in the jobless numbers. Claimant unemployment is currently 819,000. The average forecast for the end of next year is of a rise to 990,000. The gloomiest, however, is of an increase to more than 1.3m. That would still be a shadow of the early 1990s but worrying.

However, there is a nagging fear that the downturn could make unemployment a lot worse. The economy is slowing sharply - first-quarter growth has been revised down to 0.3%; GDP is only 2.3% up on a year earlier.

Most companies that I speak to have already quietly made a round of redundancies and further cuts are planned. Those figures are not yet reflected in the unemployment statistics.

Sexy utilities

BEING DULL is now sexy in the business world, and that is one of the reasons why the utilities are starting to come back into fashion. Among the best performers is United Utilities, which this Tuesday at an extraordinary meeting will ask investors to approve a £1.5 billion share buyback.

For its chief executive Philip Green it marks the culmination of a two-and-a-half year programme of change since he joined.

The company’s portfolio has been shaken up with the £1.8 billion sale of its electricity business. The capital structure has been altered and the buyback addresses the last big plank in that goal.

Operational performance has also been improved, although there is room for further improvement. The issue is, having tackled the big problems, whether a utility will be enough to keep Green in his post until the completion of the current regulatory review in 18 months.

Green, a former director at Reuters, led the container shipping company Royal P&O Nedlloyd through its flotation in 2004 and subsequent acquisition by AP Moller-Maersk. I expect he will stay on, but Green is up for another big challenge and there are plenty of those around at the moment.

Times Recommends

• UK savers left in lurch as Icesave crumbles
• RBS shares close under £1 on bailout fears
• Asian stocks rebound on Australian rate cut