Barclays forced into huge rights issue, shares plunge
London: Barclays set out Tuesday to raise British pounds 5.8 billion by offering shares at a massive discount to shareholders so as to fall into line with demands from regulators.
The issue, worth USD 8.9 billion, will be offered at almost half price and is part of a far bigger effort to plug a vast hole of British pounds 12.8 billion in the balance sheet.
Barclays made the announcement as it reported first-half results which showed a quadrupling of net profit, but the scale and terms of the rights issue drove the price of the shares down by 5.50 percent.
The London-listed bank will also issue British pounds 2 billion of "contingent capital" bonds which are turned into shares or wiped out if it gets into trouble.
The plans are aimed at meeting demands made last month by the Bank of England's Prudential Regulation Authority (PRA), which supervises the banking sector.
Following a review, the watchdog had ordered Barclays in June to increase the amount of equity it holds against total assets, a measure called the leverage ratio.
Barclays said that the moves, and separate measures to shrink parts of its business, should push its leverage ratio to above 3.0 percent, the minimum required by the PRA, by June 2014.
"As a consequence of the PRA's review we have had to modify our capital plans, in order to meet the 3.0-percent leverage ratio target," said Barclays chief executive Antony Jenkins.
"After careful consideration of the options, the board and I have determined that Barclays should respond quickly and decisively to meet this new target. We have developed a bold but balanced plan to do so.
"The plan is a combination of: a rights issue; prudent reduction of our leverage exposure; issuance of additional tier one securities; and the retention of earnings and other forms of capital accretion.
"We believe this represents the right combination to meet the PRA's leverage target. It also enables us to maintain our planned lending growth and broader support of our customers and clients."
The bank will sell the new shares at 185 pence each, which marked a steep 40.1-percent discount to yesterday's closing level.
The plans emerged as the scandal-hit bank admitted that it suffered a net loss of British pounds 168 million in the second quarter, or three months to the end of June, compared with a profit of British pounds 746 million a year earlier.