Barclays plans to raise ￡5.8 billion (US$8.9 billion) from its shareholders to address calls from Britain’s financial regulator for the 320-year-old bank to strengthen its capital reserves against potential market shocks.
The Bank of England’s Prudential Regulation Authority (PRA) yesterday said Barclays needed an extra ￡12.8 billion of capital, more than it estimated last month, and that it should fill the shortfall in the next year.
Barclays announced the fundraising alongside news that it would take another ￡2 billion charge for mis-selling products and said it was also pushing back its target to deliver a key profitability goal.
Barclays CEO Antony Jenkins said he was reacting “quickly and decisively” to the PRA and that it was happy with his plan, which includes selling ￡2 billion of bonds that convert into equity or are wiped out if the bank hits trouble, and shrinking loans a further ￡65 billion to ￡80 billion.
“I think they’ve done the right thing. Anything else would have been a fudge, they needed to get on and raise equity,” Numis Securities analyst Mike Trippitt said.
However, investors said Barclays’ move could dent the British government’s plans to start selling its shares in Lloyds Banking Group later this year, by sucking up market demand for bank stock.
The rights issue will offer shareholders one new share for every four owned at 185 pence, in an offer that allows existing shareholders to buy discounted shares first.
Barclays said the PRA had estimated its leverage ratio at 2.2 percent at the end of last month, lower than the 2.5 percent it had estimated last month.
“As a consequence of the PRA’s review we have had to modify our capital plans, in order to meet the 3 percent leverage ratio target by June 2014,” Jenkins said, referring to a key PRA goal.
Barclays said it was pushing back its target to deliver a return on equity above its cost of equity — previously 11.5 percent — to 2016, a year later than Jenkins set out in a far-reaching restructuring unveiled in February.