Why is Qatar pumping

The news that Qatar is to be the anchor investor in Deutsche Bank’s new EUR 8 bln fundraising increases once again the stake the gas-rich Emirate has in western banks.

But why? asks Forbes’ banking and finance writer Chris Wright.

Alongside a EUR 6.3 bln rights issue, some 1.75 bln of that will come directly from the Qatari royal family through its Paramount Services Holdings vehicle. While this will not be enough to earn the Qataris a seat on the board, for example, nor even a particularly significant stake, it is an interesting additional move into a sector the country now knows well. In 2008 it put GBP 6.1 bln into Barclays, through a combination of Qatar Holding – the direct investment arm of the Qatar Investment Authority sovereign wealth fund – and Challenger, which was an investment vehicle of the former prime minister of Qatar. The QIA, through Qatar Holding, also holds 6% of Credit Suisse and has stakes in Bank of America and Agricultural Bank of China.

The most obvious reason is the simple one: Qatar believes these are good long-term investments. Most western banks still trade at levels well below their pre-financial crisis highs, and have the potential to grow once they are re-established on firmer footings, which they will be once capital adequacy tests are passed (the reason Deutsche is raising money) and the rafts of litigation for foreign exchange and rate manipulation are eventually digested. Qatar did exceptionally well on its Barclays stake, enabling the bank to avoid a bailout and profiting from the subsequent share price rebound, although the precise circumstances of the capital injection have been heavily scrutinised ever since.