Q&A: what does this mean for Barclays?

Barclays is to raise £7.3 billion from investors after securing a £5.8 billion cash injection from investors in Qatar and Abu Dhabi, in exchange for a stake of over 30 per cent in the British lender.

The bank announced this morning that it will raise up to £2 billion pounds from Qatar Investment Authority (QIA), an existing shareholder, and its associated holdings, and £300 million from Challenger, an investment vehicle of a member of Qatar’s royal family.

It will also raise £3.5 billion from Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi’s royal family, which would give him a 16.3 per cent stake in the bank.

Barclays is seeking to raise up to a further £1.5 billion from existing and other investors. Barclays' shares fell by 18 per cent to 168.4p, after initially rising on the news.

The plan will help John Varley, Barclays’s chief executive, to recapitalise the bank without government help.

The bank will receive up to £7 billion for its balance sheet after the move, which is subject to shareholder approval, as the remaining £300 million will be paid in fees, expenses and commissions to the new investors.

Qatar Holdings and Sheikh Mansour Bin Zayed Al Nahyan will receive a commission of 4 per cent of the value of convertible notes they have agreed to buy, and 2 per cent of the value of reserve capital instruments — another form of share. In addition, Qatar Holding will receive £66 million for having helped arrange the capital raising.

These commissions will be paid even if shareholders do not agree to the deal.

Barclays also issued a trading update saying that group profit in the first nine months of this year was “slightly ahead” of the same level a year earlier.

It said that the results included an early estimate of the net benefits from the acquisition of Lehman Brothers' North American business as well as losses from credit market writedowns of £129 million.

In contrast with Royal Bank of Scotland, HBOS and Lloyds TSB, which will receive £37 billion from the Government to prop up their balance sheets, Barclays had said that it would raise additional funding on its own.

Last year, Barclays raised funds from the China Development Bank (CDB) and Singapore's Temasek. With today's investment, over 35 per cent of Barclays is now owned by foreign investors.

The QIA bought a substantial stake in Barclays after taking part in the bank’s £4.5 billion capital increase earlier this year.

In February, the QIA, a sovereign wealth fund set up to invest profits from the world’s largest gas field, said it had $15 billion (£9.27 billion) to spend on overseas financial institutions over the next two years.

The £30 billion fund is expected to double in size by 2010. When QIA took its first stake in Barclays in February, Mr Varley said: “The participation of players such as these is one of the most positive manifestations of globalisation. It’s highly positive that there are pools of money that can be put to work in this way. That’s very different to the world of five or ten years ago.”

Gordon Brown is to visit the UAE, Qatar and Saudi Arabia this weekend and is expected to urge the Gulf states to put more money into the International Monetary Fund (IMF). Mr Brown believes the IMF needs substantially more than the current $250 billion set aside for struggling nations.

In addition, Lehman Brothers said that it wanted to rehire about 480 former employees to assist in winding down its business as it deals with inquiries from traders and hedge funds about their transactions. It said its "current workforce is too small to manage this process without incurring unnecessary expenses and delay."

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