Barclays Plc, the fourth-biggest lender by market value in the UK, said sovereign wealth funds should be welcomed worldwide as suppliers of funding, as analysts speculate the company will need extra financing.
“No one should fear sovereign wealth funds — quite the opposite,” Barclays chairman Marcus Agius told reporters in Kuala Lumpur yesterday. “As long as they continue to act responsibly, which I’m sure they will, they will be seen for what they are — pools of capital which will be applied intelligently around the world.”
Agius, speaking at the World Economic Forum on East Asia, which is taking place in Malaysia, called sovereign wealth funds “a very good fact of life.” He declined to comment on Barclays’ capital position and said his comments on sovereign wealth funds were “generic.”
Analysts including Citigroup Inc, Standard & Poor’s Equity Research Ltd and Lehman Brothers Holdings Inc estimate Barclays will need at least £7 billion (US$13.6 billion) to strengthen its balance sheet. Barclays can strengthen its capital ratios without having to sell shares to shore up capital depleted by credit-related writedowns, finance director Chris Lucas said on Thursday.
Barclays is in talks with sovereign wealth funds to gain more than £3 billion in funding, the London-based Sunday Telegraph reported on June 8. The company sold shares to Singapore’s Temasek Holdings Pte and Beijing-based China Development Bank(國家開發銀行）last year to help finance the acquisition of Amsterdam-based ABN Amro Holding NV.
Barclay’s chief executive officer John Varley said on Thursday the company did not rule out raising additional capital, or mergers and acquisitions.
The London-based bank, which wrote down £2.3 billion in credit-related assets at its securities arm last year, forecasts lower profit growth over the next four years amid higher global credit costs and a slumping UK housing market.
“I think the crisis is not at an end,” Agius told reporters when asked if the financial-market turmoil triggered by the US subprime mortgage collapse was over.
“We’re getting to the point where assets are beginning to come to their real values, but if you ask me to put a date on it, I can’t,” he said.
Without a cash injection, Barclays’s “very tight” capital ratios will limit profitability and result in no dividend growth for the next three years, Goldman Sachs analysts said on May 16.
The company is weighing the sale of shares to replenish capital depleted by asset writedowns, two people with knowledge of the bank’s capital-strengthening plan said on June 9.
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