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Finance: Investors from Qatar are taking over Luxembourg’s KBL Private Bank, while the finance minister confirms Qatar’s state investment fund is buying BIL.
Luc Frieden confirmed that QIA would acquire a majority stake in BIL from troubled Dexia Group and the Luxembourg state a minority share during a press conference on Monday. Financial terms are still being discussed and will only be announced at the end of the two-week exclusive negotiation period that ends on October 24.
“The sale of BIL is in the national interest, because it is a systemic bank,” the finance minister explained. The Luxembourg government would not be allowed under European competition law to wholly takeover BIL, as the Grand Duchy already owns 100 percent of BCEE and one-third of BGL BNP Paribas.
Driven by the sovereign debt crisis, Dexia Group is being forced to sell its profitable operations as part of a bailout by the Belgian, French and Luxembourg governments. However, BIL customer “deposits are 100 percent safe, I would even say 200 percent,” Frieden stressed.
Dexia company flags were already in the process of being removed from the front of BIL’s route d’Esch headquarters by the time Frieden met with the media (photo).
In related news, Precision Capital--a Luxembourg firm controlled by Qatari investors--agreed to purchase KBL, the profitable private banking and life insurance unit of KBC, for just over one billion euro.
The sale of KBL was required by the European Commission when the Belgian state bailed-out KBC in 2008. Earlier this year, financial regulators rejected a proposed bid by India’s Hinduja to take over the Luxembourg-based subsidiary.
KBL had 47 billion euro in assets under management at the end of June and will continue to be based in Luxembourg, the company said in a statement. The firms hope to receive regulatory approval during the first quarter of 2012.
Qataris under scrutiny
Last week the socialist political party déi Lénk issued a critique against continued Qatari investment in key Luxembourg industries. The party asked why the government could not find Luxembourg buyers for BIL. The sale was part of what déi Lénk called the “Mittalisation” of the Grand Duchy’s economy, a reference to the Indian steel giant Mittal’s takeover of Arcelor.
Over the summer, Qatar Airways--also controlled by the QIA and members of Qatar’s royal family--bought 35 percent of Cargolux. In recent years, the Qatari fund has taken notable stakes in German carmakers Porsche and Volkswagen, Spanish utility Iberdrola, British retailer Harrods, and financial firms Agricultural Bank of China, Barclays and Santander, as well as Greece’s two largest banks.
The QIA is reportedly worth 70 billion US dollars. However financial analysts say Qatari and other Gulf investors are unlikely to have a big impact on European banks in the long-term. “Not even Qatar’s pockets are deep enough to really throw meaningful capital at the European financial system,” Rachel Ziemba, director at Roubini Global Economics in London, told Reuters.
More to come?
Qatari interest in Luxembourg “comes as no surprise” given the Grand Duchy’s recent relationship-building efforts, Luc Frieden told the press. The Cargolux deal is leading to new air passenger service between Findel and the Asia via Doha, which will only aid in helping grow links between Luxembourg’s financial centre and emerging Asian economies, he said.
The AP news agency separately reported that Qatar Airways will start cargo service between Doha and Atlanta, Houston and Toronto in November, with the jets stopping at Cargolux’s centre in Luxembourg.