Five investors are in talks to back a £4bn cash injection in Barclays to shore up the UK bank's balance sheet, with a deal expected to be announced some time next week.
Two of the bank's existing shareholders, Temasek, the Singapore sovereign wealth fund which holds 2.1 per cent of the group, and China Development Bank, which has 3 per cent, are understood to have held discussions in the past week over potentially increasing their stakes.
The Qatar Investment Authority is also believed to be involved with the process, while Japan's Sumitomo Mitsui Financial Group emerged as a potential investor yesterday.
The Japanese group has indicated that it could inject up to £470m, with talk of a further potential tie-up with Barclays over operations in Asia. The last company in talks with Barclays remains unidentified.
A source close to Barclays said: "The nature of what we're doing means the lead time is longer, but the delivery time is shorter. We are hoping it will all be sorted by the end of next week." The group is understood to favour several investors to avoid the risk of one building a more significant stake.
Barclays announced on Monday it intended to raise capital from strategic investors, rather than follow rivals including HBOS and Royal Bank of Scotland which have launched multi-billion-pound rights issues in recent months.
The group quashed speculation it was preparing a rights issue of its own last week, saying it was considering selling a stake to strategic investors to cover its capital requirements. The move was designed to cut out the risk and time-consuming nature of a rights issue in the current volatile economic conditions.
The bank had initially hoped to announce a successful closing of the transaction by yesterday, but it is understood it faced protracted talks with some parties seeking assurances, which meant the process will stretch into next week.
The wealth funds that have already taken a stake in Barclays are thought to be unhappy with the performance of their existing investments, as they have lost considerable value. Since Temasek spent £1bn on its stake in Barclays last July, the share price has plunged in the wake of the credit crunch from 735p to 309p.
One source close to the process said: "There is no doubt Barclays will get their £4bn, but there are a few points still to be negotiated."
Barclays targeted the capital raising to comply with the European capital requirement regulations. The sum of £4bn would bring the group's equity tier-one capital ratio to 6 per cent, the same level as its rivals who have carried out rights issues.
While Barclays' share price has dived, with the bank writing down £1.3bn, it was surprisingly upbeat in a trading update last week. It said its pre-tax profit in May was "well ahead" of the previous year's run rate of £590m, which sent the shares up 3.5 per cent, and has been talking a good game recently of expanding its business.
This includes its decision to buy Exprobank, a retail bank in Russia, which is set to complete in the coming weeks and could provide the springboard for further expansion in the country.
The group also made a long-awaited expansion into mergers and acquisitions after poaching a 40-strong team from Royal Bank of Scotland.Reuse content