The main Middle East investor who pumped billions of pounds into Barclays two years ago has locked in a profit of about ￡3 billion (US$4.8 billion) on the investment after a complex deal that sent the bank’s shares lower.
The sale came as concern mounted that income at Barclays Capital (BarCap), the investment bank arm, will fall short of expectations for the third quarter and possibly next year.
PCP3, a vehicle of Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi’s ruling family and the owner of English soccer team Manchester City, exercised 131.6 million warrants in Barclays late on Thursday and simultaneously entered into a hedging arrangement with Nomura.
The deal leaves Sheikh Mansour with a 6.3 percent holding in Barclays, which he has fully hedged to protect him from any fall in the share price.
As part of the complex hedging transaction, Japanese bank Nomura sold 220 million shares in Barclays to hedge its own exposure. The shares were sold before Friday’s opening at near ￡2.95 per share, a person familiar with the matter said.
Barclays shares closed on Friday down 2.2 percent at ￡2.9725, one of the weakest UK blue-chip stocks. The stock fell as low as ￡2.9285, its lowest since for five weeks.
“Abu Dhabi still have upside exposure in the stock, but they’re taking some money off the table,” said Manoj Ladwa, senior trader at ETX Capital.
Shares were also hurt by an expectation that investment banks will suffer a drop in income of at least 10 to 20 percent in the third quarter from the second quarter, after a slow July and August.
“Sentiment is poor, Q3 investment bank earnings will be weak and, realistically, the best possible outcome for Barclays Capital is modest outperformance,” said Ian Gordon, analyst at Exane BNP Paribas.
BarCap’s revenue could dip to less than ￡3 billion in the third quarter from ￡3.3 billion in the previous three months. Credit Suisse analysts said there was a risk that expectations for next year were also “materially too high.”
Barclays, which also raised funds from Qatar, China, Japan and Singapore investors in 2008, is in talks to buy UK credit card business Egg from US bank Citigroup in a possible ￡400 million deal, Sky News reported on Friday.
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