This morning Barclays revealed the details of its £4.5bn cash call, designed to steady the ship after its various sub-prime losses. A sizeable chunk of this is coming from three new investors with very deep pockets: the state-owned Qatar Investment Authority (best known for its attempt to buy Sainsbury’s), which is buying £1.76bn of new shares; Challenger, the investment vehicle of Qatar’s Prime Minister, who’s snapped up £533m worth, and Japan’s Sumitomo Mitsui Banking Corporation, which is chipping in £500m.
Since the China Development Bank and Singapore’s Temasek are also stumping up another £136m and £200m respectively, to maintain their current shareholdings, there’s going to be a distinctly Eastern flavour to Barclays board meetings from now on. The rest of the £4.5bn is coming from unnamed institutional investors (presumably big pension funds), who are contributing £1.3bn, and existing shareholders, who will get the chance to buy 3 new shares for every 14 they own – at a discount of 9% to yesterday’s closing price.
Barclays reckons about half of the new money will be used to shore up the holes in its balance sheet (its so-called ‘equity tier one capital ratio’, a measure of its financial strength, will now be 6.3% - which interestingly is still well below that of most of its rivals). The rest will apparently be used for a shopping spree, as rivals pull their horns in. ‘We position ourselves to capture opportunities for new business at attractive margins,’ said CEO John Varley, waving his Barclaycard excitedly. The US will be a particular focus, but the Sumitomo deal should also give it more oomph in Japan.
In fact, Varley and investment banking boss Bob Diamond were sounding remarkably chipper this morning, arguing that Barclays was managing the current upheaval better than most. ‘We draw strength from the continued resilience of our trading performance, with profits in May well ahead of the monthly run rate of last year,’ said Varley, who says there are no plans to change the dividend. Diamond was even more gung-ho: ‘We are going to outperform,’ he told journalists this morning. And the market seemed to buy it – Barclays’ share price promptly shot up 5%.
If nothing else, the QIA will be hoping that it has more luck with Barclays than it did with that other great British institution, Sainsbury’s – particularly now that it’s got the PM (or His Excellency Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, as Barclays insists we call him) breathing down its neck...