Page last updated at 17:46 GMT, Friday, 31 October 2008

Barclays secures Middle East cash

Barclays bank branch
Barclays has weathered the financial crisis better than other UK banks.

Barclays has announced a proposal to raise up to 7.3bn to strengthen its balance sheet.

The money will be mainly raised from the state investment funds and royal families of Qatar and Abu Dhabi.

Unlike other big UK banks, Barclays did not want to accept a bail-out from the UK government and said the move would keep it "strong and independent".

If the deal is completed as expected, the Middle Eastern investors will have an almost 32% stake in Barclays.

BBC business editor Robert Peston said the deal showed that Barclays was in a stronger position than other UK banks.

"It can probably allow itself just a small smile of self-congratulation, having avoided putting out the begging bowl to British taxpayers," our correspondent said.

Qatar Holdings - 12.7%
Challenger (Qatar) - 2.8%
Sheikh Mansour Bin Zayed Al Nahyan (Abu Dhabi) - 16.3%

However, he added that the terms of the deal were not necessarily cheaper than those offered by the Treasury.

Barclays shares initially rose on the news, but later reversed course as investors worried about the cost of the funding.

At the close, the shares were down 12.84%, or 26.3p, at 178.9p.

Qatar and Abu Dhabi

Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi's royal family, is investing up to 3.5bn in Barclays.

If the deal is completed as expected, he will end up with a 16.3% stake in the bank.

The board believes that this maintains Barclays as a strong, independent and well-capitalised bank
Marcus Agius, Barclays chairman

It is also raising up to 2bn from Qatar Holdings and 300m from Challenger, controlled by Qatar's Royal Family.

That could leave the two Qatari investment vehicles, which already have small holdings in Barclays, with stakes of 6.2% and 2.8% respectively.

Barclays is also seeking to raise an additional 1.5bn from existing institutional investors such as pension funds.


Barclays said the plan allowed the bank to fulfil the capital raising requirements stipulated by the UK government.

"The board believes that this maintains Barclays as a strong, independent and well-capitalised bank," said Marcus Agius, Barclays chairman.

The government is injecting 37bn into Royal Bank of Scotland, Lloyds TSB and HBOS to avoid a collapse of the sector.

However, in return for the rescue, they must give major stakes to the government and halt cash bonuses for bank board members this year.

HSBC, along with Barclays, opted not to seek cash from the government.

In a trading update, Barclays said its profits before tax in the nine months to the end of September were better than in the same period last year although it did not give a figure.

This is despite a 1.2bn write-down on the value of assets hit by the financial crisis, the bank said.

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