The Qataris seem to have had enough. After a bumpy 15-year ride as one of Barclays’ biggest shareholders, the Qatar sovereign wealth fund has jettisoned half its almost 6 per cent stake, banking £510 million. It has reduced its Barclays bet modestly before, in 2020 and 2021, but this is a more emphatic move towards the exit.
It isn’t saying why. But it is thought to have suffered large losses after backing Credit Suisse, another wounded bank it first rescued in the banking crisis, which is now being absorbed by UBS. Perhaps it has had its fill of plausible investment bankers promising jam tomorrow.
It’s hard to overstate the Gulf state’s impact on Barclays and the UK finance industry. Qatar’s first capital injection in June 2008 enabled the bank to make a (failed) attempt to buy Lehman Brothers before its collapse and later a (successful) acquisition of the US securities division from the corpse of Lehman. That in turn cemented its strategy for the next 15 years as a global bank with massive exposure to the volatile and risky business of “bulge bracket” investment banking.
Qatar’s second capital injection, a few months later in the teeth of the crisis, enabled Barclays to sidestep the unwanted embrace of a UK government rescue, keeping it independent and free of state interference, unlike Royal Bank of Scotland and Lloyds TSB.
Without those dollars from Doha, Barclays today would almost certainly be a much smaller, duller, UK-focused business. It would also have escaped many of the mis-selling and other scandals that followed. How has it been for Qatar? It is hard to say for sure. It paid an effective “in price” of 198p and 153p on its two equity investments, while the Barclays share price today is just 140p. That suggests heavy losses will have been crystallized.
But Qatar enjoyed other goodies from those two extremely complex deals. Within a year it banked £615 million of option profits from warrants issued at the same time as the new shares, while it also acquired £1.25 billion of Barclays bonds with a mouthwatering coupon of 14 per cent for ten years.
Then there was the little matter of (ahem) those £332 million of sweeteners to get the deal over the line — payments not fully disclosed to ordinary shareholders and, of course, the subject of two later fraud trials. All Barclays execs were acquitted but Barclays was fined £50 million by the Financial Conduct Authority over the same episode.
Is Qatar wise to bale out now? Barclays shares by most measures look cheap, trading at 0.4 times book value and yielding 5.2 per cent. The rise in interest rates of the past two years has fattened up margins, while bad debts look containable if the West can manage to avoid recession in the next couple of years.
The big unknown for Barclays, and the big worry for some investors, is the same as it has been for 30 years. Is the big wager on investment banking worth the candle? Do enough of the lumpy, volatile, unreliable rewards from the wholesale securities market feed through into shareholder returns? Are the inevitable shocks and setbacks worth it?
Barclays has promised a strategic review, codenamed Minerva, in February, which may give some of the answers. Meantime, Qatar can comfort itself with the knowledge it’s an awful lot less trouble owning uncomplicated trophy assets like Harrods and The Ritz.
Driving confusion
The concession from Brussels is good news for UK carmakers which would otherwise have found their exports to the EU clobbered with a 10 per cent tax. Now the onus is on Britain to start to get more batteries made locally. That won’t be made any easier by the new figures yesterday showing a surprise fall in battery electric vehicle sales.
It’s hard to believe there is no connection between the government’s U-turn on banning sales of new petrol and diesel cars and this sudden reversal. It’s only one month’s data and other factors may be at work. Cost of living pressures may have pushed more people to opt for cheaper petrol cars. There were delays to the supplies of some electric vehicles including Teslas in the month. And stories about range anxiety and the fibs told by carmakers about distances on one charge no doubt deterred a few.
The delay from 2030 until 2035 got a raspberry at the time from most carmakers, who above all want consistency in policymaking. The parallel quotas regime will still bite and force carmakers to make 80 per cent of their output fully electric by 2030. But the ban delay seems unfortunately to have sent a different message to motorists — that the need for change is less urgent.
Meet the new boss
Rupert Soames is an inspired choice of president for the CBI, perhaps too inspired. The plain-speaking Soames will be a great cheerleader and communicator at an organisation that has failed to speak out for big business and prefers mealy-mouthed corporate speak. Soames can barely open his mouth without saying something vivid. “My shit-o-meter hasn’t pinged in almost a year,” he once proudly declared after a scandal-free spell at his old accident-prone business Serco.
Schooled under Arnold Weinstock at GEC and having fought fires at both Aggreko and Serco, no one is better equipped to speak knowledgeably about the practical difficulties faced by business. But his patrician manner and Bullingdon Club background won’t do him favours with some, especially at an organisation trying to rehabilitate itself over rape and sexual misconduct allegations. “I have a horrible habit of walking towards gunfire,” he says. Stand by for explosions.
