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Qatar may not be lifeline Europe hoped

Qatar may not be lifeline Europe hoped

It bought into a Greek bank and some German brands but Qatar may be more interested in Asia, after all. And Europe can't turn to Abu Dhabi either.

October 10, 2011 11:13 by



Hopes for an influx of money from Qatar and other rich Gulf states into battered European banks may be disappointed, since Gulf investors are likely to see many of the banks as too risky and out of line with their investment strategies.

As Europe’s banking system has weakened over the last several months, financial markets have been abuzz with rumours and media reports about possible investments from the Gulf — particularly from cash-rich Qatar, which has been on an international acquisitions spree.

In June, Spanish bank Santander denied a report that it was in talks on Qatar buying a stake in it. Last month, France’s BNP Paribas denied a similar report. The latest speculation centres on assets of financial group Dexia; the prime ministers of France and Belgium were meeting on Sunday to discuss breaking up the group.

POCKETS NOT DEEP ENOUGH

Analysts and bankers said it was possible that Qatar would make relatively small investments, perhaps of several hundred million euros, in European financial firms. Some European media reports last week said Qatar was part of an international consortium discussing a purchase of Dexia’s Luxembourg arm, valued at some 900 million euros ($1.2 billion).

But analysts said Qatar and other Gulf states were unlikely to invest aggressively enough to make much difference to big European financial institutions.

“Not even Qatar’s pockets are deep enough to really throw meaningful capital at the European financial system. They could participate in some of the capital raising that banks are doing, but ultimately, public multilateral support is needed,” said Rachel Ziemba, director at Roubini Global Economics in London.

“Investors like Qatar will be seriously looking to see whether the macroeconomic framework and policy response will give them a good return on their investment. Qatar was slow to invest in the first round of bank recaps in 2008 to 2009, and actually extracted some of the stronger returns.”

A Doha-based financial industry executive said he believed Qatar was probably “talking with every bank in Europe. But it remains to be seen whether the negotiations will lead to anything concrete.”

AVAILABLE FUNDS FOR SMALL SCALES

Official data are not available but Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA), is estimated to have assets worth around $70 billion, of which an unknown proportion is currently not invested and available for new deals.

QIA has been active abroad in the last several years, spending more than $20 billion on stakes in German carmakers Porsche and Volkswagen, Agricultural Bank of China, Santander Brasil, Spain’s Iberdrola and German builder Hochtief . It has snapped up Britain’s luxury department store Harrods and two European football teams.

In June 2008, QIA and a member of Qatar’s ruling family paid about 1.8 billion pounds ($2.8 billion) for a stake in British bank Barclays, subsequently reaping a profit of about 600 million pounds on part of it.

In August this year it bought about 17 percent of the lender that will be created by the merger of Greece’s Alpha Bank and Eurobank , injecting 500 million euros into the new entity at a critical time for the cash-strapped country.

But analysts said the Alpha Bank merger did not indicate Qatar was willing to take on financial sector risk on a large scale — especially at a time when…

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