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Japan's SMFG May Take 4% Barclays Stake

Japan's Sumitomo Mitsui Financial Group could take a stake of up to 4 percent in British bank Barclays, two senior banking sources said on Monday.

A woman leaves a branch of Barclays Bank in central London, Monday, April 23, 2007. ABN Amro NV and Barclays PLC announced Monday they have agreed to merge, in the largest cross-border combination in European banking history. (AP Photo/Sang Tan)
Sang Tan
A woman leaves a branch of Barclays Bank in central London, Monday, April 23, 2007. ABN Amro NV and Barclays PLC announced Monday they have agreed to merge, in the largest cross-border combination in European banking history. (AP Photo/Sang Tan)

That would represent a stake worth about $1.6 billion, bigger than the holding it had been expected to take.

Sumitomo Mitsui was discussing investing about $926 million in the UK bank, sources familiar with the matter had told Reuters on Friday. Some analysts said this investment was too small a starting point for Japan's third-largest bank.

A deal will be announced soon at close to Barclays' current price, the banking sources, who asked not be named as talks are confidential, added.

Barclays is this week expected to raise about $8 billion from sovereign wealth funds and other investors.

Up to five outside investors are expected to participate, and backers may include existing investors Singapore-based sovereign wealth fund Temasek and China Development Bank, plus the Qatar Investment Authority.

Under a structure outlined last week, it would then offer shareholders the right to buy on the same terms, so the holding taken by outside investors could then be reduced.

Barclays shares closed 3.7 percent higher Tuesday at 310.75 pence, valuing the bank at just under 20 billion pounds (US$39.3 billion).

Barclays and SMFG in London both declined to comment.

After a decade of faltering under bad debt, Japanese banks have cleaned up their balance sheets and rebuilt their businesses. Now faced with a shrinking market at home, Tokyo's big banks are once again looking for opportunities abroad.

Asian lenders, which avoided the worst of the subprime crisis, are in a strong position to step in with funding for their overstretched Western rivals.

Barclays' credit crunch-related losses are far lower than many rivals but it still has one of Europe's leanest levels of capital adequacy.

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