Why is Qatar pump­ing

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.