Qataris cash in on Barclays

Qatar Holding sells its rights to increase its holdings in Barclays Bank, triggering a sell-off on the London market.

Barclays shares fell in London after Qatar Holding anounced that it had monetised its holdings of 379 million Barclays warrants. Jason Alden / Bloomberg News

Qatar Holding has cashed in hundreds of millions of pounds worth of warrants in Barclays Bank, as the future of Britain's second-biggest lender hangs in the balance and regulatory challenges increase.

The unit of Qatar's sovereign wealth fund said yesterday it had monetised its holdings of 379 million Barclays warrants for an undisclosed sum.

The warrants, which give an investor the option to buy shares in the future, would have been worth close to £1 billion (Dh5.88bn) if priced at yesterday's closing share price for Barclays. "We remain a supportive strategic investor in Barclays, and maintain our confidence in the long-term prospects for the business," said Ahmad Al Sayed, Qatar Holding's chief executive.

The company, currently the single biggest shareholder in Barclays, will retain its 6.7 per cent stake in the bank. But the warrants sale triggered a private placement of shares to institutional investors by Deutsche Bank and Goldman Sachs, the banks that initially led the transaction, reaping an expected US$1.2bn (Dh4.4bn), according to a term sheet obtained by Bloomberg News.

Barclays' shares fell 5.0 per cent in afternoon trading in London after the announcement. The bank's shares have risen 37.3 per cent so far this year, in spite of the Libor rate-rigging scandal that claimed the scalps of the chief executive Bob Diamond and the chairman Marcus Agius.

"Barclays welcomes Qatar Holding's message of confidence in its long-term prospects and continues to appreciate the consistent support it has received since Qatar Holding became its largest shareholder," said Antony Jenkins, who became the chief executive of Barclays in August.

A former retail banker, Mr Jenkins was brought in to right the bank's course following multiple scandals. Barclays is also under pressure over whether its retail and investment banking units should remain yoked together.

The exit by Qatar Holding comes as Barclays faces an investigation from the United Kingdom's Serious Fraud Office over "certain commercial arrangements" between the two units in 2008. At the time, Barclays raised £6.7bn from Arabian Gulf investors.

Barclays had sought private funding during the time to avoid nationalisation by the British government, a fate which befell rivals Royal Bank of Scotland and Lloyds Banking Group. It was later revealed during a parliamentary hearing that Barclays had discussed its Libor submissions with the Bank of England because it feared that its high rate of interbank borrowing could give investors the impression that the bank could not fund itself.

Recent investments by Qatar had left it with an increased proportion of investments in Europe and in financial services, which may have convinced Qatar Holding to shift some of its assets into investments in other parts of the world, said Victoria Barbary, senior researcher at the sovereign investment lab at Milan's Bocconi University. "On a portfolio level, it makes more sense for them to cash out and rebalance than to use these warrants to buy more stock," she said.

Qatar owns sizeable stakes in a number of financial firms, including Credit Suisse and Agricultural Bank of China. Both slid by about 0.2 per cent each in midday trading yesterday.

The country is also a major investor in London office space, with a stake in Songbird Estates, which owns Canary Wharf, along with owning control of The Shard skyscraper.