Qatar Comes to European Banks’ Rescue – With a Twist

Qatar is again swooping in to help one of Europe’s biggest banks – this time with a twist.

Paramount Holdings Services, a vehicle owned by former prime minister Sheikh Hamad bin Jassim Al Thani, agreed to put 1.75 billion euros into Deutsche Bank this week as part of a capital-raising to help it fare better in banking-system stress tests.

In one sense, that squares with other Qatari investments in European banks: Qatari vehicles helped prop up Credit Suisse and Barclays PLC in 2008 when those banks came asking for capital at the onset of the financial crisis. Qatar injected billions of dollars in exchange for an 8.9% stake in Credit Suisse and 12.7% of Barclays. It has since reduced those stakes and, in the case of Barclays, made a large profit on part of its holdings.

But while these rescues came via Qatar Holding, the direct investment arm of the country’s main sovereign wealth fund, the new investments are direct by Mr. Al Thani. Also known by his initials HBJ, Mr. Al Thani was until the middle of last year the deputy head of the Qatar Investment Authority and was widely considered the architect of its aggressive strategy.

Mr. Al Thani, a member of Qatar’s royal family, lost his position at the QIA last summer after Qatar’s emir was succeeded by his son. But aided by his own substantial wealth and dealmaking acumen, bankers and analysts say he now appears to be continuing on the path he started at the QIA.

The Deutsche Bank transaction is the biggest evidence to date of Mr. Al Thani’s continuing appetite for big direct deals. Another vehicle controlled by Mr. Al Thani agreed to buy the Jersey-based producer Heritage Oil last month for $1.55 billion.

The Deutsche Bank deal going to Mr. Al Thani wasn’t surprising given that he likely had a strong relationship with the lender dating to his time at the QIA, said Victoria Barbary, the director of Institutional Investor’s Sovereign Wealth Center in London.

“I suspect the relationship they had was with HBJ, so it makes perfect sense it would be the kind of thing he would be doing,” Ms. Barbary said. “He’s going to be an active investor in his own right rather than using the QIA.”

Without HBJ at the helm, the QIA appears to be taking a quieter approach. While bankers say the fund is still hunting for direct investments, it has been shifting to a less-splashy strategy where equities and index investing play a bigger role. The QIA did about $4.3 billion in direct deals in the first six months of last year while HBJ was still at the fund, but that declined to less than $1 billion in the second half of the year, according to Ms. Barbary.

Qatar is a country of only 2 million people, most of whom are expatriate workers. The country is building out its local infrastructure with growing gas revenues and investing excess funds globally as a long-term saving strategy. It is the largest exporter of liquefied natural gas in the world.

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(via WSJ Blogs)