Barclays needs to come clean about its Gulf investments
Speculation about Barclays’ capital raisings from Qatar and Abu Dhabi will only grow following Euromoney’s revelations. CEO Antony Jenkins should draw a line under the episode by revealing all.
The results of a near two-year investigation by Euromoney into Abu Dhabi investment in Barclays in October/November 2008 are published this month.
It shows that questions remain to be answered about the adequacy of disclosure around the transaction. The investments were held in vehicles whose ownership was unclear. Barclays also offered Mansour downside protection on the securities he bought, despite receiving hugely generous rewards in the form of coupons for the risks he was certainly taking.
The investigation also reveals that as the clock ran down, advisers to Sheikh Mansour were hawking large chunks of his investment to other interested parties, at a time when Barclays was making great play of the importance of having a cornerstone investor of his private wealth and standing. These contingency measures raise questions about market confidence and the disclosure to third parties of sensitive financial information. Barclays did not comment on this when asked to do so by Euromoney.
Our story answers a number of questions about what happened to £110 million ($170 million) in fees paid by Barclays ostensibly to Sheikh Mansour for his £3.5 billion investment. It reveals the role that Amanda Staveley, the Gulf dealmaker extraordinaire, played in the capital raising. It shines a light on the remarkable, and seemingly arbitrary, way that some or all of those fees were disbursed among Sheikh Mansour’s advisers. It is a remarkable story of one of the most important transactions of the financial crisis, which helped Barclays avoid the need for a bailout from the UK government.
But it still only tells some of the story.
The Barclays capital raisings of 2008 remain shrouded in mystery and intrigue, and are the subject of investigation by both the UK’s Serious Fraud Office and the US Department of Justice.
Much of the focus to date has been on the injections by Qatar in June and then November 2008, notably the so-far unproven allegation that Barclays lent Qatar the money to invest in the bank. There are also questions about a payment of £66 million provided by Barclays in June 2008 to the Qataris for unexplained “advisory fees”.
These issues continue to haunt Barclays. That’s despite the fact that all of the main figures involved in the capital raisings – chairman Marcus Agius, CEOs John Varley and Bob Diamond, deal structurer Roger Jenkins and finance director Chris Lucas – have left the bank.
New chairman David Walker and chief executive Antony Jenkins are making a big play of the new broom they have brought into Barclays, sweeping up the mistakes of the past.
The capital raisings of 2008 were not a mistake. It is right and proper that a bank should avoid taking government money at almost any cost. It’s in investors’ best interests that they do not – ask any Barclays shareholder if they would like to swap places with counterparts in RBS or Lloyds – and also it’s the appropriate market-based action for an institution that makes its money operating in markets.
It’s easy to forget now, five years on, just how desperate those times were for people running the world’s biggest banks. The prospects of survival could change every hour of every day. Banks were scrambling for any help that they could get.
That Barclays found help should be of credit to its management. That the investors from Qatar and Abu Dhabi stepped up to give that help should also be praised. The fact that they then made handsome rewards – Sheikh Mansour’s own advisers say that he made more than £3 billion in profit on his £3.5 billion investment – is the very stuff of financial markets.
When huge deals are put together at such speed and at such pressure it is inevitable that mistakes will be made. But the dripping out of the truth behind these investments is doing no good whatsoever to Barclays’ reputation as it tries to make a fresh start.
Barclays might argue that its hands are tied by the investigations taking place. The Salz review of its business practices, published at the beginning of April, acknowledges the issues around the capital raisings but uses the investigations as a reason to give no further explanation.
Be that as it may, it is time for Barclays – as soon as possible – to come clean on the Qatar and Abu Dhabi investments. The most pressing issue is to say, once and for all, who got paid what and why they were paid those amounts.
If Jenkins wants to make a break from the mistakes of the past, it’s the best course of action he could take.