In October 2008 the Qatari Sovereign Wealth Fund took an equity stake in Barclays as part of a more general bailout package. Barclays looked to private overseas funding rather than seeking funds from the UK monetary authorities. This was questioned at the time, but it has meant that Barclays’ response to the financial crisis has been purely commercial, and that the strategies followed by the bank lack the political tinge that is now colouring the UK banks that did take public funds.
And now the issue of payback arises. The Qatari stake was acquired when Barclays was trading at under £2.00 per share. In recent weeks, Barclays has been trading in the range of £3.60 to £3.80 per share. The share have fallen back to about £3.60 on the news of the Qatari sale. However, if the BBC is right that 379 million shares are to be sold, if the stake was acquired at around £2.00 per share, and if the striking price is in the region of £3.60 per share, then the Qatari fund is likely to make a profit (i.e. net gain, not just sale proceeds) of £600 million.
This need not exercise us too much. The important question is – if the Qatari fund can make this much money out of a relatively small bailout (they only put in three quarters of a billion to begin with), then how much can UK Financial Investments Ltd make with the UK bailout of £37 billion? Very little futures work concerning the future PSBR is adequately factoring in the extent of the possible proceeds from asset sales. By 2018, when things become a bit more acute, there is still a very real prospect of assets sales being used to size down the National Debt.
On a separate note, this is the second bailout repayment that we have come across (click here for details of the first). Both stories have a happy ending for the institutions providing the bailout funds, and both bode well for the future of the UK debt.