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Qatar to invest 300 mln euros in Spanish banks

Source: Reuters - Mon 28th Feb 2011

Qatar will invest 300 million euros in Spanish banks and has discussed other investments with Spain's prime minister, Qatari Prime Minister Sheikh Hamad bin Jassim bin Jabr al-Thani said on Monday, commenting how the move would be to "invest in these companies and capitalise them".

"We have confidence in the Spanish economy; the government has taken many positive steps," Sheikh Hamad told reporters on Monday.

"In the next 10 days to two weeks there may be some more (investment announcements)," he said, declining to indicate any further specifics on companies or amounts.

He was speaking at a joint conference with Spanish Prime Minister Jose Luis Rodriguez Zapatero. The states signed a memorandum of understanding on the bank investments. Sheikh Hamad is also the chief executive of the Qatar Investment Authority, the Gulf state's sovereign wealth fund. Qatar's emir will visit Spain on a state visit in April.

"This will be an important step forward for the Spanish economy and will consolidate confidence," Zapatero said.

Spain is under intense market scrutiny on concerns banks' overexposure to a real estate collapse could force Madrid to follow Greece and Ireland and seek an international bailout.

Spain's banks have mostly been shut out of international wholesale debt markets, with some economists claiming they could be facing a capital shortfall of up to 120 billion euros.

To assuage fears about the health of the country's unlisted savings banks, or cajas, the government approved a decree forcing these regional banks to seek private capital either by direct investment or stock market listings.

But overseas investors' interest in the cajas has been muted so far, apart from a tepid response from U.S. private equity firm J.C. Flowers in December.

"This is a shot in the arm for the cajas now as they brace for stock market listings. It's a good sign and may just be what other investors need to put some money on them as well," a bank analyst at a Spanish brokerage said.

"The savings banks are a long term bet as there is still a lot of restructuring to be carried out. However, this is the sort of investment which fits in with a sovereign wealth fund's strategy," he said.

Zapatero said the two sides had also agreed on more investment by Qatar in the communications and energy sectors. He also indicated that Spain might increase the amount of gas it imports from the Gulf state.

Last week, Qatar said it was open to buying stakes in part state-owned British lenders RBS and Lloyds TSB . Qatar, the world's largest exporter of liquefied natural gas, has been on an acquisition hunt in recent years.

The Gulf Arab state has stakes in companies including retailer J Sainsbury, Barclays bank and German automaker Porsche through QIA.

It sold a portion of its stake in Barclays in 2009 reaping a significant profit.

Earlier this month, the QIA's Qatar Holding unit invested in contingent convertible bonds issued by Credit Suisse. Other high-profile investments made by QIA over the past couple of years include the 1.5 billion pound acquisition of iconic London department store Harrods.

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