Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Archive | November, 2016

Crédit Agricole poised for profit warning

Posted on 31 January 2013 by

Crédit Agricole is poised to issue a profits warning, which could come as soon as Friday, linked to reducing the amount of goodwill on its books.

Shares in the French bank fell 1.5 per cent to close at €7.28 on Thursday on fears that the publicly quoted but mutually owned bank would warn investors that it would not meet consensus estimates for the fourth quarter, because of bigger than expected write-offs.

    In November, Crédit Agricole reported a worse than expected third-quarter loss of €2.85bn, reflecting the weighty price paid for its exit from Greece and exposure to other heavily indebted eurozone countries, including Italy and Spain.

    The bank is already in the red for the nine months to the end of September 2012, having made a net loss of €2.5bn during the period, mainly due to Emporiki, its lossmaking Greek bank, which it sold in October for €1 to Alpha Bank of Greece, incurring a €1.8bn loss.

    “The main focus is likely to be on goodwill, which stood at €17bn in June 2012,” said analysts at Citigroup. The analysts added that the temptation to “kitchen-sink” the accounts – that is include as many writedowns as possible – in the fourth quarter would be great given the extent of restructuring this year to help conform to new regulatory rules.

    Société Générale, France’ second-biggest bank by market value, said earlier this month it planned a €384m writedown on the goodwill of its 50 per cent stake in Newedge, the broker. Crédit Agricole owns the remaining share of Newedge.

    Analysts expect Crédit Agricole, which is France’s third-largest bank by market value, to announce a list of one-off writedowns and impairments when it reports its full-year results on February 20.

    These are expected to include a €750m loss on the theoretical cost of buying back its own debt and provisions at Cariparma and Agos, its Italian subsidiaries.

    The bank recorded a €572m goodwill impairment, mostly on its Italian consumer-credit business, in its third quarter.

    Morgan Stanley chief given pay cut

    Posted on 31 January 2013 by

    James Gorman, Morgan Stanley chief executive, has been handed a 7.1 per cent pay cut despite a near-doubling of his performance-related bonus.

    Details of Mr Gorman’s pay, which was foreshadowed last week in a regulatory filing, were released by the bank on Thursday after Morgan Stanley’s board met to finalise his package.

      Mr Gorman was given a performance-related bonus of $3.75m, on top of $2.6m of deferred cash, $2.6m of stock options and a salary of $800,000. Mr Gorman’s salary for 2013 has been almost doubled to $1.5m, the bank said Thursday.

      The $9.75m package for 2012 is below the $10.5m Mr Gorman earned for 2011. The chief executive said he has been slashing pay and bonuses for his bankers as he seeks to cut costs and boost returns for the restructured bank’s shareholders.

      Robert Kidder, independent lead director of the bank’s board, said in Thursday’s filing: “2012 was a transition year for Morgan Stanley, and management along with much of the organisation saw reduced compensation.

      “The board is confident of the strategic decisions taken by senior management and our decision to grant these forward-looking LTIP [long-term incentive programme] awards reflects that confidence.”

      Details of Mr Gorman’s new LTIP were also outlined in the filing. The chief executive will receive $3.75m if he meets certain targets, which were not disclosed. That is up from the $1.94m Mr Gorman could earn under the bank’s last performance payout system, announced in 2011.

      Mr Gorman could earn as much as $7.5m if he “meaningfully” surpasses the company’s targets, or nothing if he fails to match those goals.

      Ruth Porat, the bank’s chief financial officer, will earn $2.75m if she meets goals. Greg Fleming, head of Morgan Stanley wealth management, and Colm Kelleher, president of the bank’s institutional securities business, would each earn $3m.

      Morgan Stanley’s return on equity – a key measure of its profitability – was a mere 6 per cent in the last three months of 2012, lagging behind competitors such as Goldman Sachs. Mr Gorman has said he wants to achieve a return on equity of at least 10 per cent.

      Rajaratnam informant sentenced to one year

      Posted on 31 January 2013 by

      Roomy Khan, a trader-turned-government informant who helped authorities build insider trading cases against Raj Rajaratnam and more than a dozen other Wall Street figures, was sentenced to one year in prison.

      Prosecutors asked the judge for leniency citing Khan’s “extremely substantial” co-operation but they also told the judge that her repeated lies about the depths of her involvement in insider trading, deletion of emails, and tip-offs to sources about the government probe “negatively impacted” the ongoing investigations. Her lawyer asked for probation.

        The sentence was longer than other cooperators who avoided prison time, but likely reflected her past skirmishes with the legal system. Khan was first convicted of insider-trading in 2002 and lied to law enforcement officials after agreeing to co-operate in 2007. Prosecutors said Khan continues to assist them on open cases.

        A native of India, Khan was a late bloomer on Wall Street. She earned masters degrees in Physics and electrical engineering in the US before going to business school. When she landed a marketing job at Intel in its Silicon Valley office, Khan began sharing confidential information with Mr Rajaratnam, founder of Galleon Group.

        Mr Rajaratnam was convictedof insider trading and is serving an 11 year prison term.

        “It was her eager desire to work in Wall Street coupled by her belief that she was considered ‘old’ to begin a career at a financial services firm that led to her passing insider information to Raj Rajaratnam in the late 1990s,” her lawyer said in a letter to the judge. Khan pleaded guilty in 2002. She received three years probation.

        An active trader, Khan personal portfolio was valued at $50m at its peak, but her lawyer says when the internet bubble burst in early 2000, she lost 99.2 per cent of her money.

        With mounting bills, Khan got a job at Trivium Capital, a hedge fund, and for the second time began illegally trading on inside information with Mr Rajaratnam and others.

        In a letter to the judge, Khan said “the shame and ignominy of losing my house and status in this society became more important than the unlawfulness of insider trading and the fear of getting caught.”

        She was approached by the FBI in 2007 and agreed to secretly record phone conversations for more than a year. She was not a witness in Mr Rajaratnam’s trial, but did testify for the government against Doug Whitman, a portfolio manager who was convicted of insider trading.

        Santander drawn into Italian bank scandal

        Posted on 31 January 2013 by

        The fallout from a state bailout of Monte dei Paschi di Siena, the world’s oldest bank, widened on Thursday as prosecutors questioned the head of Santander Italy.

        Prosecutors have intensified their inquires into the government’s controversial decision to go ahead with €3.9bn in loans to Monte dei Paschi, following revelations that its former management – under investigation for alleged fraud and other financial crimes – hid lossmaking derivatives contracts from supervisors.

          Santander has been drawn into the investigations having sold the Italian regional bank Antonveneta to Monte dei Paschi for €9bn in 2007, a costly acquisition at almost 20 times earnings that undermined the Tuscan bank’s capital strength. It later sought to bolster its capital through a series of deals including the use of structured finance.

          Prosecutors in Siena questioned Ettore Gotti Tedeschi, the head of Santander Italy, for four hours.

          The Siena tribunal said it was also considering opening an inquiry into insider trading and stock manipulation at the 500-year-old lender.

          The investigations follow a public and political outcry over the bailout of Monte dei Paschi, the bank’s second in four years, that has animated debate in the run-up to national elections next month.

          The Bank of Italy has already been forced to defend its role as banking supervisor, while Giuseppe Mussari, the head of the banking lobby, resigned from his role due to his links with Monte dei Paschi. He was chairman of Monte dei Paschi until last year when he was forced to exit under pressure from shareholders.

          Questions had been raised about Monte dei Paschi’s acquisition of Antonveneta almost immediately after the deal was finalised.

          Santander had acquired Antonveneta from the break-up of Dutch bank ABN Amro for €6.6bn, and in one of the most audacious “flips” of recent years, sold it to Monte dei Paschi only a few days later for €9bn.

          The fact that Monte dei Paschi has since had to ask the Italian state for roughly the amount as a bailout as Santander made in profit from the deal has especially angered senior Italian officials.

          Shadow banks fill project debt void

          Posted on 31 January 2013 by

          Pension funds and insurance groups are filling the void left by banks in the rapidly changing infrastructure debt market, raising hopes this kind of financing can help spur a global economic recovery, according to Standard & Poor’s.

          Infrastructure debt is vital for the building of schools, hospitals and roads, which governments hope will help create jobs and drag the faltering economies in the industrialised world out of the economic doldrums.

            Pension funds and insurance groups, dubbed shadow banks as they replace traditional banks as lenders, are forecast to more than double the amount they lend for infrastructure or project finance globally this year, S&P, the rating agency, will say in research published on Friday.

            But the agency warns of the dangers of a credit bubble because of the opaque nature of shadow banking, where it is difficult to track price movements, particularly in a market that is relatively illiquid.

            Michael Wilkins, a managing director at S&P, said: “The landscape of infrastructure financing is changing. With traditional lenders such as banks and governments under severe economic pressure, infrastructure projects worldwide are increasingly turning to the shadow banking sector.”

            S&P forecasts lending by pension funds and insurance groups for infrastructure or project finance will rise to $25bn globally in 2013, a sharp increase from the estimated $10bn last year. The total market is valued at $198.7bn, according to Project Finance International, a data provider.

            Although banks still provide the bulk of the loans, they have started to withdraw lending for infrastructure or project finance because of new regulations and capital constraints following the financial crisis, which mean they need more liquid instruments such as government bonds.

            S&P said alternative debt financing from shadow banks, which is mainly from pension funds and insurance companies with a small amount from hedge funds and sovereign wealth funds, may help reduce the cost of borrowing for infrastructure projects. But, on the downside, it says there is the threat of a build-up of systemic risks because of the opaque nature of the sector.

            Banks are expected to continue to be the predominant source of financing for infrastructure as shadow banking groups remain cautious, particularly over lending for so-called greenfield projects.

            Infrastructure projects are classed as greenfield, which involves raising money for new buildings where there is construction risk as a venture may be delayed or left unfinished, and brownfield, which is considered less risky as it is for improvements or upgrades to existing infrastructure.

            Banks set aside £700m for swaps scandal

            Posted on 31 January 2013 by

            Barclays, HSBC, Royal Bank of Scotland and Lloyds have set aside about £700m for compensation for mis-selling complex derivative products to small businesses but analysts suggest the final cost to the industry of the latest mis-selling scandal could be up to £2bn.

            The Financial Services Authority on Thursday ordered the four banks to review all their sales of interest rate hedging products, including swaps and more complicated products, to small businesses that it concluded were “unlikely to understand the risks associated with those products”.

              They had already agreed to compensate mis-selling victims after an earlier probe found “serious failings” in the way customers were sold products meant to protect them from swings in loan-repayment costs. The latest FSA study will determine how many cases the banks will have to look at.

              Interest rate derivatives are supposed to protect businesses against rising interest rates. But in a pilot study of 173 interest rate products, the FSA found that nine out of 10 products sold to small and medium-sized businesses by the four banks failed to meet regulatory requirements and that a “significant” portion of customers should receive compensation.

              Britain’s biggest lenders have already set aside around £12bn in compensation for customers who were mis-sold payment protection insurance. In addition, Barclays and UBS have paid nearly £1.3bn in penalties related to the Libor scandal, while RBS is expected to settle shortly with US and UK authorities.

              The FSA said banks had sold about 40,000 derivatives to “non-sophisticated” customers since 2001.

              The Federation of Small Businesses said on Thursday that the banks need to take “swift and decisive action” to compensate businesses caught up in the scandal.

              Vince Cable, business secretary, said: ““This is an example of the little guy paying for the big banks’ wrongdoing. The immediate priority is to ensure small businesses are not driven out of business by banks pursuing liabilities for swaps that they mis-sold.”

              The FSA reviewed 173 sales to unsophisticated customers in detail and found that more than 90 per cent did not meet regulatory requirements. But the watchdog said the earlier investigation had focused on more complex cases and might not be representative of all sales.

              The contracts were designed to protect companies from interest rate rises by fixing rates on their loans. However, when the base interest rate dropped to historic lows, some businesses were hit with fees and others complained they faced huge penalties for cancelling the hedges or refinancing their loans to take advantage of lower rates.

              Some SMEs also said they were told that buying the swaps was a condition of taking out a loan, while others complained of high-pressure sales tactics and large fees to exit the swaps.

              The scale of the new review is a setback for the banks, which had hoped a victory for RBS in the first interest rate swap case to come to trial would translate into a narrower requirement. But the FSA on Thursday said that ruling, which found that RBS had properly advised customers on the risks involved, was too specific to have broad application.

              Sandy Chen, an analyst at Cenkos, wrote in a note to clients that “the eventual quantum of redress will be relatively small compared to the PPI and Libor-related charges”.

              The FSA is still reviewing sales by Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire banks, Co-operative Bank, and Santander UK. It aims to announce the scale of customer reviews at those banks by mid-February.

              Investors enliven second generation CDOs

              Posted on 31 January 2013 by

              Whatever you do, don’t call it a collateralised debt obligation. If Wall Street never sees the letters C, D and O side by side again, it will be too soon.

              These financial instruments, built out of other financial instruments built out of mortgages that no one could afford, poisoned the banking system. As, of course, you will have heard.

                Click to enlarge

                Except that not all CDOs were built out of trash, and a handful of the less dizzyingly complex ones in fact performed OK through the financial crisis. After a decent interval, CDOs look to be coming back as a means of funding for commercial property.

                The area of revival is narrow, and the experiment so far is small. Royal Bank of Scotland identified five deals in recent months with CDO-like characteristics, built out of mortgages on commercial real estate (CRE). The development was enough to make Richard Hill, strategist at RBS, exclaim: “It’s alive! Call us, Dr Frankenstein.”

                That was the headline in Mr Hill’s note to clients. In fact, he sees nothing monsterish in the revival, and every reason to treat these latest issues seriously.

                “The business we used to call CRE CDOs should have done a better job of differentiating between different classes of deals,” he says. “CRE CDOs was a big umbrella. The differentiating part is the collateral. These new issues have taken very strong steps not to call themselves CDOs, and that is fair.”

                So what has come on the market? Several offer just a modest twist on traditional commercial mortgage-backed securities, which are bonds backed by a defined pool of commercial property loans. Three of the deals were collateralised with loans that are too risky for traditional CMBS, either because they are mortgages on recently refurbished properties or risky mezzanine loans that have to wait in line behind first-lien mortgages to get paid in a bankruptcy.

                But Arbor Realty Trust last September became the first manager since the crisis to issue a full-blown collateralised loan obligation, a kind of CDO, where investors do not have a full picture upfront of which commercial mortgages would go into the pool. It raised $125m for a deal giving it flexibility to invest some of the money into loans of its choosing.

                Investor reaction was positive enough that Arbor closed a second, $260m deal this week, for which it did not have to offer as big a premium over Treasury yields.

                “These deals are consistent with a market where rates are very low and spreads have tightened considerably,” says Franco Castagliuolo, a portfolio manager at Fidelity Investments. In other words, investors will find the additional complexity and risk is worth it, if the deals offer better yields than those available elsewhere.

                The re-emergence of CDO-like structures in commercial real estate is perhaps inevitable, since traditional CMBS now yield just 1.3 percentage points more than Treasuries, according to Barclays. Spreads have not been this tight since before the US property market began heading south in 2007.

                Fidelity has not bought any of the new-generation CDO-like securities, but in common with a lot of sophisticated investors over the past year, it has been buying up some of the pre-crisis CDOs when they have fallen to attractive levels.

                The five deals on the RBS list of CDO-like investments total little more than $1bn so far, compared with a traditional CMBS market that roared back to $48.4bn in new issuance last year. No one is forecasting a return to the pre-crisis era when CRE CDO issuance peaked at more than $60bn in 2006.

                Neither is anyone predicting a return to a time when investors around the world were clamouring for CDOs made out of a ragbag of risky assets, including non-standard loans, equity tranches of CMBS and even pieces of other CDOs, all curated by a CDO manager with wide latitude to choose the investments it wished.

                In one deal that does echo that phenomenon, Deutsche Bank recently created an internal CDO that bundled pieces of old CDOs and other assets, so as to sell a €110m slice of the risk, but that was a bespoke deal for a single client.

                In the commercial real estate space, “banks are going to be reluctant, since regulators are wanting them to return to a much more simplistic model, and it will be difficult to gain support from an issuer and an investor perspective”, says Mr Hill.

                “But,” he adds, “there is a real place in CRE finance for a return to CRE CDOs backed by simple, safe first mortgages.”

                Low rates spark corporate bond bonanza

                Posted on 31 January 2013 by

                It’s been a dramatic start to the year for global corporate bond markets. Companies borrowed more money than in any other January on record.

                Bullish sentiment has encouraged investors to lend despite slender returns. But the strength on the issuer side is driven not only by the low cost of debt, but by fear that it may never be this good again.

                  Click to enlarge

                  This comes as markets are abuzz with talk of a bubble in credit, with even the most bullish investors starting to say the straightforward rally in credit that has been lifting the entire asset class may be petering out.

                  Companies were able to issue more than $180bn worth of debt in the past four weeks, according to Dealogic, up 25 per cent from the same month last year. Every week a new deal was done that made market watchers bristle with excitement.

                  Earlier this week came the largest Greek corporate bond since the sovereign debt crisis began with a €700m issue from OTE, the Greek telecoms company, as strong demand spilled into even the more beleaguered regions of the world.

                  In France EDF, the state-owned utility, launched a hybrid bond – which falls in the very riskiest part of the capital structure – for €6.2bn.

                  This was the largest such deal on record by nearly four times and was heralded as a breakthrough moment for the asset class.

                  In the US, where nearly $60bn worth of deals made it the best start to a year ever, Tenet Healthcare and Denbury Resources issued a combined $2bn worth of “junk” bonds below the 5 per cent threshold, establishing record low coupon levels for five-year and above bonds.

                  “Volumes are running at a record pace,” says Mathew Cestar, head of leveraged finance in Emea at Credit Suisse. “Investors have, globally, taken up large quantities of paper, reflecting an improvement in market sentiment.”

                  But January may prove to be the exception in 2013.

                  This is because it is fear of a market turnround that is persuading many corporates to issue debt early, suggesting the rest of the year could be less buoyant.

                  Analysts say many companies will simply have completed their funding requirements.

                  “We still believe we will see overall issuance of investment grade debt fall by 10-15 per cent this year,” says Nigel Cree, head of syndicate desk Americas at Deutsche Bank. “The manic pace of the first three weeks of the year is likely to slow down.”

                  Ed Marrinan, head of macro credit strategy at RBS Securities, adds: “We do feel this is a quick start which will ultimately slow down. Corporate paper should be down as a result of so much pre-funding last year.”

                  The fear is due partly to worries about volatility. Analysts at RBS say that, in Europe, there could be a 10-15 per cent spread widening from current levels as the Italian elections, Spanish budget numbers and fiscal cliff negotiations shake markets off their record high levels in the short term.

                  “Credit investors have been fed a large diet of new corporate issuance over the last months. Now we think they are starting to get indigestion and will take pause,” says Lee Tyrrell-Hendry, macro credit analyst at RBS.

                  “The economic outlook remains uncertain,” adds Morven Jones, head of corporate debt capital markets for Europe at Nomura. “Against this backdrop, issuers are understandably looking at where rates are and locking in a low cost of capital.”

                  There are also concerns that in some parts of the market, there could be a more substantial reversal in prices further down the line, leading to higher borrowing costs. Even an indication of inflation returning or central banks being less accommodating could be catastrophic for longer dated bonds, for example.

                  Bond prices have already started to fall in recent weeks after months of strong gains that pushed yields to all-time record lows. Most view this as a small correction, but with yields at such low levels corporate treasurers take the view it might be wise to tap the market sooner rather than later.

                  There is also a sense that prices are unlikey to rise at the same rate in 2013 as they did following central bank action in Europe and the US late last summer.

                  “We think the kind of broad based rally we saw last year is unlikely to happen again,” says Nick Gartside, chief investment officer for international fixed income at JPMorgan Asset Management. “Value will be far more deal specific.”

                  Matthew Craston, head of alternative investments at asset manager ECM, says: “Spreads can tighten further, but I do not think anyone feels we can have anything approaching the kind of year we had last year.”

                  Also driving a slowdown in issuance through the rest of the year would be weak mergers and acquisitions activity globally, which limits the need for new funding and leaves companies just refinancing the existing debt.

                  “Companies do not need to issue if they do not have a good use for the cash,” says Brendon Morgan, global co-head of corporate origination at Société Générale.

                  Barclays in Qatar loan probe

                  Posted on 31 January 2013 by

                  UK authorities are probing an allegation that Barclays loaned Qatar money to invest in the bank as part of its cash call at the height of the financial crisis in 2008, which enabled the bank to avoid a UK government bailout.

                  While the terms of Barclays’ emergency fundraising have been under the scrutiny of the Financial Services Authority and the Serious Fraud Office since the summer – with a particular focus on fees paid for the deal – allegations over a loan to the Qataris is a new thread of the investigation. Two sources familiar with the situation have independently told the Financial Times of the investigation into the alleged loan.

                    If confirmed, such an arrangement could contravene market regulations if it was not properly disclosed at the time, legal and industry experts warned. “The concept of lending money to any investor to purchase your own shares raises a series of immediate questions about disclosure and other regulatory issues,” said Peter Hahn, a former banker at Citi now at Cass Business School.

                    The revelation is yet another blow for attempts by Antony Jenkins, Barclays’ chief executive, to clean up the bank’s image that has been tarnished by high-profile scandals ranging from Libor manipulation to the mis-selling of payment protection insurance.

                    Chris Lucas, Barclays’ chief financial officer, is among four former and current executives investigated in connection with the capital raising.

                    The probe underscores broader inquiries by authorities worldwide on the terms of deals struck at the height of the financial crisis – often with Middle Eastern and Asian investors – as western banks battled to stay out of government control.

                    Dexia, the Franco-Belgian lender, came under scrutiny in 2011 when it emerged it had loaned two of its biggest institutional shareholders money to buy its shares in 2008.

                    The Icelandic prosecutor investigating the collapse of Kaupthing has examined a loan the bank allegedly made secretly to a Qatari royal, Sheikh Mohammed bin Khalifa al-Thani, in 2008 to fund the purchase of Kaupthing’s shares. Four Icelandic individuals have been charged in the case.

                    Barclays turned to Qatar Holding, a subsidiary of the Qatar Investment Authority, and Challenger – an investment vehicle of Sheikh Hamad bin Jassim bin Jabr al-Thani, the prime minister of Qatar and his family – twice in 2008 for a total of £6.1bn. The sheikh – often referred to as HBJ – is also the chairman of Qatar Holding.

                    Neither HBJ nor Qatar Holding is accused of wrongdoing and their lawyer at Stephenson Harwood and their spokesman declined to comment.

                    The SFO, FSA also declined to comment. The bank said the authorities’ investigations were ongoing. It neither denied nor confirmed the revelation.

                    The bank’s first cash call, in June 2008, saw Qatar Holding, Challenger and other sovereign wealth funds including Temasek of Singapore invest a total of £4.5bn in the bank. The second capital raising involved Qatar Holding and Challenger investing with Abu Dhabi a total of £7.3bn in the bank. The identity of any borrowers and size of the alleged loan are unclear.

                    As part of the June cash call’s terms, the bank said it had entered into an arrangement whereby the QIA would advise Barclays in the Middle East. Then in October, the bank said that Qatar Holding would receive £66m for “having arranged certain of the subscriptions in the capital raising”.

                    The bank revealed the FSA’s probe in its interim results in July, adding that Mr Lucas was being investigated with three other former and current employees. The others were John Varley, the bank’s former CEO, Richard Boath, its current co-head of global finance in Europe, the Middle East and Africa, and Roger Jenkins, the former head of Barclays’ tax advisory business.

                    Additional reporting by Camilla Hall in Abu Dhabi

                    German IPO raises more than €1.3bn

                    Posted on 31 January 2013 by

                    Real estate group LEG Immobilien has raised more than €1.3bn in the second-largest German initial public offering in five years, after its shares were priced in the middle of the expected range at €44.

                    The deal comes amid hopes of a revival in the European IPO market following 2012, which was the second-worst year for deal activity since the financial crisis. There are 14 deals planned in Europe this year already, according to Dealogic.

                      LEG Immobilien owns 91,000 homes in North Rhine-Westphalia, Germany’s most populous state, and is being sold by Goldman Sach’s Whitehall property funds at a time of strong investor interest in German housing.

                      A combination of low vacancy rates along with stable rents and income streams has attracted pension funds, insurers and other long-term investors to the German sector.

                      The deal was about four times subscribed, according to bankers involved, with 70 per cent of the demand coming from UK and US investors. The initial range was €41 to €47, later narrowed to €43 to €45.

                      “This deal attracted significant demand from both euro and US funds, with investors focused both on the strong cash flow of the company and potential for future growth,” said Jim Garman, global co-head of real estate investing at Goldman Sachs.

                      Almost €100bn of private funds flowed back into the eurozone’s periphery late last year, according to ING, after action by the European Central Bank encouraged reinvestment in crisis-hit countries.

                      LEG is the largest European real estate offering since Russia’s $1.9bn PIK Group in May 2007 and the largest real estate IPO globally since China’s Global Logistic Properties $3.0bn IPO in October 2010, according to Dealogic.

                      It is also the largest in Germany since Telefónica’s German unit raised €1.45bn in October.

                      A number of other property-based initial public offerings have been proposed this month, with housebuilder Crest Nicholson announcing plans last week for a £500m offering.

                      Goldman’s Whitehall property funds own 89 per cent of LEG, with the rest held by Perry Corp, the hedge fund.

                      The partial exit from LEG for Goldman comes after its Whitehall unit in December said it would divest part of its German commercial property portfolio, agreeing a €1.1bn deal to sell 17 department stores to an Austrian investor.

                      Last year, Terra Firma, the private equity group controlled by veteran investor Guy Hands, announced plans to refinance the €4.3bn of loans secured against its portfolio of 180,000 apartments. The refinancing paves the way for what is likely to be the largest stock market flotation of a German residential property business.