x Abu Dhabi, UAETuesday 25 July 2017

IPIC unloads Barclays stake

Barclay's shares drop as much as 14% in early trading in London, after IPIC says it plans to sell a $6.8bn stake in the bank.

A branch of Barclays in North London. IPIC has sold a stake for a profit of $2.4bn.
A branch of Barclays in North London. IPIC has sold a stake for a profit of $2.4bn.

The Abu Dhabi Government's International Petroleum Investment Company (IPIC) has sold a stake in Barclays Bank for about US$5.7 billion (Dh20.93bn), making it among the first of the Gulf's large investors to reap profits from buying into troubled western financial institutions. IPIC made $2.4bn in profits from the sale, after stepping in to help the UK's third-biggest bank avoid a government bailout last October. Global stock markets have rallied since IPIC acquired a stake of more than 11 per cent in the bank, boosting the value of Barclays shares by 52 per cent. The stock fell as much as 16 per cent in early London trading yesterday. "The bottom fishing went well and they took some profits," said Eckart Woertz, an economist at the Gulf Research Centre in Dubai. "Among the big investments from the Gulf into western financial institutions, this is one of the first to end really positively for the investor, because of its fortunate timing." In October, Barclays announced that it had sold the stake to Sheikh Mansour bin Zayed, the Minister of Presidential Affairs, through three investment companies. These companies were then transferred to IPIC, where Sheikh Mansour is the chairman. IPIC said it was selling its stake to re-focus its attention on the energy sector. Khadem al Qubaisi, the managing director of IPIC, said in a statement: "The decision to dispose of some of its interests in Barclays reflects the focus of IPIC's long-term investment strategy on hydrocarbon-related opportunities. Mr al Qubaisi added: "The Emirate of Abu Dhabi intends to maintain a close commercial and strategic relationship with Barclays in the future." Analysts said the sale might be a signal that other investors in Western banks may begin cashing in on their stakes. Manoj Ladwa, a senior trader at the spread betting company ETX Capital in London, told Bloomberg: "This tactical move brings into question any foreign investment in major companies ? in particular investment from the Middle East. I would expect further falls from companies with similar exposure." An IPIC subsidiary called PCP Gulf Invest 1 has hired Credit Suisse to help it sell mandatory convertible notes, equivalent to 1.3 billion shares of Barclays stock, IPIC said. The stake would be sold at 265 pence (Dh15.96) a share, according to Credit Suisse. Another subsidiary of IPIC is considering selling its stake in Barclays. John Varley, the chief executive of Barclays, was criticised by shareholders last year for striking deals with Abu Dhabi and other investors in Qatar, Singapore, and China, to avoid selling a stake in the bank to the British government. Since then, the British government has said Barclays' capital was adequate, restoring investor confidence in the bank. Barclays has used the financial downturn to expand its operations globally, acquiring Lehman Brothers' operations in the US. Mr Varley said: "In the period since IPIC and the government of Abu Dhabi took a position in Barclays in 2008 through their purchase of [mandatory convertible notes] and [reserve capital instruments] we have been able to broaden our strategic and commercial relationship, and we look forward to developing this further going forward." Other large investments from regional sovereign-related firms include a $7.5bn stake made by the Abu Dhabi Investment Authority in Citigroup during the early stages of the financial crisis. Although the fund has received interest payments on the convertible bonds, analysts say it is unlikely to profit from the investment overall, given the fall in Citigroup's share price during the past two years. IPIC, established in 1984 to invest in oil-related ventures outside Abu Dhabi, is a joint creation of the emirate's sovereign wealth fund, Abu Dhabi Investment Authority, and Abu Dhabi National Oil Company. IPIC also controls Aabar Investments, which has recently acquired stakes in AIG's private banking subsidiary; Daimler, the German car manufacturer; Nova Chemicals of Canada; Cepsa, the Spanish energy group Cepsa; and Man Ferrostaal, the German engineering firm. tpantin@thenational.ae