Barclays may get an investment of almost 500 million from Japan’s Sumitomo Mitsui in a deal that will see the Japanese bank buy a slug of new shares in the UK lender.
Nikkei English News reported that Sumitomo Mitsui will pay 100 billion yen for ‘several’ percent of Barclays in a private placement of new shares. The two banks will also bolster cooperation in Asia, including the exchange of employees, the report says.
Barclays can raise up to 7 billion to repair its stretched balance sheet under the mandate its shareholders provided at the last annual meeting. The bank, which was rumoured to be holding discussions with Singaporean investor Temasek this week about a cash injection, has permission to issue 1.1 billion of stock – or 5% of the share capital – to new investors without shareholder approval.
It also has the authority to issue a further 28% to existing shareholders. In total, Barclays is able to issue a third of its existing equity again without calling an extraordinary general meeting.
Chief executive John Varley is believed to be keen to carry out a placing that can be completed faster than a rights issue and at a discount to the share price of no more than 10%.
The global credit crisis that erupted almost a year ago has forced banks and securities firms worldwide to raise 150 billion as investment writedowns eroded their capital.
Barclays’ UK rivals Royal Bank of Scotland, HBOS and Bradford & Bingley have all either raised or are in the midst of raising new capital.
Japanese banks have escaped the magnitude of losses that forced US and European rivals to trim costs and fire executives, leaving them better-placed to expand abroad.