Barclays to issue £5bn in shares to plug capital gap

The banking group announced the highly discounted rights issue on Tuesday after discovering in June it had a lower ‘leveraged ratio’, 2.2 per cent, than the 3 per cent set by the PRA.

The shares, which will come with a 40.1 per cent discount, were announced as part of a 29-page ‘Leverage Plan’ document. The news accompanied reports that pre-tax profits at the bank dropped by 17 per cent to £3.59bn during the first six months of 2013.

In the 135-page interim financial report for the year to date, the profit fall was attributed to a widespread restructuring programme, dubbed the “transform plan”.

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Anthony Jenkins, chief executive of Barclays, said the bank needed to respond “quickly and decisively” to meet the PRA’s target by June 2014.

He added: “It also enables us to maintain our planned lending growth and broader support of our customers and clients.”

David Walker, chairman of Barclays, said he expected the bank to be in an “even stronger position” following the rights issue, paying out a 40-50 per cent dividend from next year.

Industry view
Justin Cooper, chief executive officer of share registration services provider Capita Registrars, said: “Barclays is between a rock and a hard place. The health of the banking sector matters to investors. It makes up £1 in every £11 of all dividends paid by UK companies, less than half the pre-crisis levels. The regulator’s demand to hold large amounts of capital is one of the main reasons for the sharp decline. The regulator’s insistence that Barclays raises another £12.8bn in capital is a big blow. Half of this will come through a hugely dilutive rights issue.”

Adviser view

Daniel Clayden, director of Devon-based Clayden Associates, said: “The widely held assumption that the banking sector has got its balance sheet in order has been damaged by this development. Other banks may well have to follow suit, and it could harm their lending if they haven’t got the necessary capital to meet adequacy requirements.”