SWFs' cash must be welcomed: Barclays

The London-based bank wrote down £2.3bn in credit-related assets at its securities arm last year. (GETTY)

Barclays, the UK's fourth- biggest lender by market value, said sovereign wealth funds should be welcomed worldwide as suppliers of funding, as analysts speculate the company will need extra financing.

"No one should fear sovereign wealth funds – quite the opposite," said Barclays Chairman Marcus Agius in Kuala Lumpur yesterday.

"As long as they continue to act responsibly, which I'm sure they will, they will be seen for what they are – pools of capital, which will be applied intelligently around the world."

Agius, speaking at the World Economic Forum on East Asia, which is taking place in Malaysia, called sovereign wealth funds "a very good fact of life". He declined to comment on Barclays' capital position and said his comments on sovereign wealth funds were "generic".

Analysts including Citigroup, Standard & Poor's Equity Research and Lehman Brothers Holdings estimate Barclays will need at least £7 billion ($Dh50.2bn) to strengthen its balance sheet. Barclays can strengthen its capital ratios without having to sell shares to shore up capital depleted by credit-related write-downs, Finance Director Chris Lucas said.

Barclays is in talks with sovereign wealth funds to gain more than £3bn of funding, the London-based Sunday Telegraph reported earlier this month.

The company sold shares to Singapore's Temasek Holdings and Beijing-based China Development Bank last year to help finance the acquisition of Amsterdam-based ABN Amro Holding.

Barclay's Chief Executive Officer John Varley said on May 12 the company will not rule out raising additional capital, or mergers and acquisitions to shore up capital.

The London-based bank, which wrote down £2.3bn in credit-related assets at its securities arm last year, forecasts lower profit growth over the next four years amid higher global credit costs and a slumping UK housing market. "I think the crisis is not at an end," Agius said when asked if the financial market turmoil triggered by the US sub-prime mortgage collapse was over. "We're getting to the point where assets are beginning to come to their real values, but if you ask me to put a date on it, I can't."

Without a cash injection, Barclays's "very tight" capital ratios will limit profitability and result in no dividend growth for the next three years, Goldman Sachs analysts said May 16.

The company is weighing the sale of shares to replenish capital depleted by asset write-downs, two people with knowledge of the bank's capital-strengthening plan said June 9.

"I think that the debate has moved on. They are seen as, and they should be seen as, essentially forces for good. This is money which belongs to nations. People who are investing them are investing them for financial purposes. They want to achieve a good rate of return because they want that wealth to come back to the country they represent, which is no different, if you like, from any other investing institution," he said.

"What happens in the future I think depends entirely on how it works out in practice. But the concern that has been expressed in the past is, if you like, an ignorant and nervous reaction that there would be irresponsible behavior without any evidence that that is the case. And as time goes by and as responsible behaviour comes to be seen as being the norm, the absolute norm, then I think those concerns will go down.

"And if that happens, and I'm optimistic that it will, then I think this reallocation of wealth around the world is a force for the good."

"I think Asia is exceptionally well placed, and why wouldn't it? If I think of our organisation having to make its own investment decisions the same way as a sovereign wealth fund has to make their decisions, we'd look for opportunities where there are going to be exceptional growth and we find those in the economies of Asia and we will seek to do more business there.

"We have absolute understanding that we have to learn our way and that's a challenge we're prepared to rise to. But it's something to be absolutely seen as inevitable because it makes economic sense. And it's going to apply to sovereign wealth funds and therefore money will come in this direction."

 

Credit crisis not near an end

The global sub-prime crisis has yet to run its course, the Chairman of British bank Barclays said yesterday, amid concerns that big lenders will unveil more credit-related losses in coming weeks.

"The crisis is not near an end. I think it will have a little further to go," Marcus Agius said. "But we are beginning to see trades taking place and assets beginning to come to their real value. It will work its way out."

A meltdown in the US sub-prime mortgage market which began last year and ensuing turmoil in global credit markets has forced financial firms around the world to take more than $300bn (Dh1.1trn) in write-downs on risky securities linked to housing markets.



Bank seeking £4bn cash injection

Barclays is seeking to raise £4 billion (Dh28.8bn) from investors, including two sovereign wealth funds who have already plowed money into the British banking giant, the Sunday Times of London reported yesterday.

The daily said the state-owned China Development Bank, which took a three per cent stake in Barclays last year, and Temasek Holdings, the Singapore government's investment agency, had been approached by Barclays to buy new shares in the bank.The Times quoted an unnamed adviser to a sovereign wealth fund as saying that fundraising could be completed within the next 14 days.

No one picked up the phone at Barclays's office yesterday.

 

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