Published June 4, 2009

Temasek sold Barclays stake and took a hit

It bailed out in Dec-Jan and lost £500-600 million, sources say

By SIOW LI SEN

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(SINGAPORE) Temasek Holdings has bailed out of another banking investment: it has divested its entire 2 per cent stake in UK bank Barclays Plc and has suffered a loss of £500-600 million (S$1.2-1.4 billion) in the process.

According to sources, Temasek sold its 2 per cent holding in Barclays in December and January when the stock fell to its lowest on fears that it could be nationalised by the British government.

Both Temasek and Barclays declined to comment yesterday.

On Jan 23, Barclays dropped to a low of 51.20 pence. Temasek had bought its 135 million Barclays shares in 2007 at £7.20 apiece. Barclays, HSBC and Standard Chartered are the three British banks which did not accept government money.

A source said that once Temasek decided to cut its losses, timing the sale was out of the question.

'It was sold over a period - you never know the highest or lowest,' the source said.

It's not clear if the £500-600 million hit on the investment includes foreign exchange losses.

When Temasek bought its 2 per cent stake in Barclays back in July 2007 for about £1 billion, £1 was worth S$3.08; yesterday, it was S$2.386.

Temasek was one of two Asian investors which bought into Barclays in 2007 to help it mount a takeover bid for Dutch bank ABN Amro Holding.

It was then billed as the biggest bank takeover in history and the eventual victor, the Royal Bank of Scotland (RBS), was brought to its knees by that expensive exercise. Today, RBS is 70 per cent owned by the British government.

News that Temasek sold its Barclays stake comes shortly after last month's report that it divested its Bank of America stake at a US$3 billion loss.

In contrast, the Abu Dhabi government-owned International Petroleum Investment Company (IPC) made a US$2.5 billion gain from selling on Tuesday its 11 per cent-plus stake in Barclays.

IPC had invested in Barclays last October when the bank did a private placement to avoid taking money from the UK government.

But a source said Temasek's divestments were part of a decision to move back to Asia, where returns are better.

Since last December, Temasek-linked companies have raised a staggering S$10.5 billion from rights issues. Last month, it paid US$600 million to raise its stake in China Construction Bank to 6.5 per cent.

Last month, Myrna Thomas, Temasek managing director, corporate affairs, in a letter to the media said: 'To achieve our investment objectives, we constantly review our portfolio and rebalance it from time to time.

'We may choose to divest an investment, even at a loss, to optimise our risk or portfolio exposures, or if there are better opportunities elsewhere or later. We may also choose to hold or increase our existing investments.'