Barclays to issue £5.8bn new shares

Barclays to issue £5.8bn new shares
Published: 30 July 2013
Barclays will issue £5.8bn in new shares as part of a move to plug a £12.8bn capital shortfall created by new regulatory demands.

The bank will also issue £2bn of bonds that are turned into shares or wiped out if the bank gets into trouble.

The size of the rights issue is much larger than analysts had expected.

Barclays chief executive Antony Jenkins said the plan would not reduce the supply of vital loans to small businesses and households.

Last month, Mr Jenkins had argued against the fresh capital requirements, warning that if Barclays had to meet this tough measure it could be forced to scale back its lending to small businesses and households.

"I am certain the decisive and prompt action we are taking will leave Barclays stronger," he added.

The share sale will be done as a rights issue, giving existing investors the opportunity to buy new shares so their stakes will not be diluted.

The bank will also reduce the level of risky assets on its balance sheet by between £60 to £80bn.

Barclays' move comes after the banking regulator - the Prudential Regulation Authority (PRA) - issued tough new capital requirements aimed at ensuring banks are protected from the risk of investment losses, even in the event of a fresh financial crisis.

The PRA requires all banks to have a minimum leverage ratio - a measure of financial health indicating the amount of capital held by the bank relative to its gross lending - of 3%.

Under the new requirements, Barclays was found to have a capital shortfall of £12.8bn.

Meanwhile, Barclays said adjusted second quarter pre-tax profit fell 17% in the second quarter to £3.6bn.

Mr Jenkins said performance indicated "good momentum". The £3.6bn adjusted pre-tax profit figure excludes a higher-than-expected additional £1.35bn charge for PPI Payment Protection Insurance misselling costs and £650m for interest rate hedging compensation. In total, these two issues have cost Barclays £5.5bn.

Payment protection insurance (PPI) was designed to cover loan repayments for policyholders who became ill, had an accident or lost their jobs.

Mr Jenkins said the bank's plans would help it in its bid to transform itself into what it calls a "Go-To" bank. The transformation project, announced earlier this year, aims to improve the bank's image.

Barclays has come in for much criticism in recent years, following a series of scandals.

Shares in Barclays fell 6% in early trading.
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