Font Size

- Aa +

Mon 22 Sep 2008 10:59 PM

Font Size

- Aa +

Qatari royal buys into Icelandic bank

Sheikh Mohammed bin Khalifa Al-Thani buys 5% stake in island's largest bank Kaupthing for $284mn.

A member of Qatar's royal family has bought a 5 percent stake in Icelandic bank Kaupthing for 25.6 billion Icelandic crowns ($284 million), the firm said on Monday.

Kaupthing, the North Atlantic island's largest bank, said Sheikh Mohammed bin Khalifa Al-Thani had become its third-biggest shareholder with the purchase of 37.1 billion shares from the bank at a price of 690 crowns each.

Icelandic banks have been pushing to secure funds to service foreign debts and one analyst said this move represented another step in that direction.

"It's a positive in the sense that they are getting capital coming in," said Andreas Hakansson, analyst at UBS.

Hakansson at UBS said Kaupthing had been impressive in raising retail deposits in Europe but he remained concerned about asset quality.

"Asset quality problems are, in my view, ahead of them rather than behind them," he said. The UBS analyst identified British property, Danish property, holding companies and leveraged finance as four troublesome asset areas.

Earlier this year Kaupthing bought Reykjavik Savings Bank, or SPRON, in a move seen as helping to increase its retail deposit base.

Elsewhere in Icelandic banking, rival Glitnir and Byr Savings Bank announced on Monday that they were in merger talks. Byr is an unlisted, local savings firm whose Web site says it had 208 staff as of last year.

Iceland's banks and its economy have been in the spotlight since investors turned risk-averse early this year, prompting a sudden collapse in the Icelandic crown. The crown's weakness increases the amount the banks must pay to service their debt.

The crown last week resumed its decline, falling to a fresh record low of 136.41 per euro. At 1135 GMT it was at 130.60 per euro. It was around 100 per euro before it tumbled in March.

Highlighting continued worries about the island-nation, the International Monetary Fund last week said Iceland's economy will come to a standstill this year and contract in 2009-2010.