Barclays today called on its shareholders to stump up a higher than
expected pounds sterling 5.8 billion through a massive issue of new shares, as
part of its plan to plug a pounds sterling 12.8 billion shortfall identified by
the new bank regulator.
Barclays also took another pounds sterling 2 billion hit for mis-selling payment protection insurance and interest rate swaps, taking the total set aside for mis-selling to pounds sterling 5.5 billion.
However, in a sweetener to investors, the bank said that once it had closed the capital gap identified by the Prudential Regulation Authority (PRA), it would be able to increase its dividend payouts by more than expected from 2014.
Chief executive Antony Jenkins, who took over after Bob Diamond quit in the wake of the Libor-rigging scandal last year, said: "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."
Barclays' first-half profits fell 17 percent to pounds sterling 3.59 billion, which was slightly lower than City estimates and included a pounds sterling 640 million charge for Jenkins' restructuring plan, which aims to save pounds sterling 1.5 billion in annual costs and will see a total of 3,700 jobs go by 2015.
Under the rights issue, existing shareholders will be offered one new share for every four they own at 185p a share, which is a 40 percent discount to last night's closing price. Today Barclays shares dropped another 17.2p to 291.8p but are still up more than 12 percent this year.
The PRA and Bank of England said they welcomed Barclays' move, calling it "a credible plan to meet a leverage ratio of 3 percent, after adjustments, by June 2014 without cutting back on lending to the real economy".
Barclays will sell up to an additional pounds sterling 80 billion of assets, raise another pounds sterling 2 billion through the issue of "CoCos", loss-absorbing securities, and retain more of its earnings in order to meet the PRA's pounds sterling 12.8 billion target.
Jenkins said: "The board and I are aware of the implications of a rights issue for shareholders. We hope to balance this with reduced uncertainty in the outlook for Barclays and with enhancement of our dividend payout from 2014."
He added that once the new capital is in place, Barclays could increase the amount of earnings it pays in dividends to shareholders from his original target of 30 percent to somewhere between 40 percent and 50 percent.
Barclays is paying some pounds sterling 150 million in fees for the rights issue, much of which will go to the lead underwriters and bookrunners: Credit Suisse, Deutsche Bank, Bank of America Merrill Lynch and Citi.
(c)2013 London Evening Standard
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Distributed by MCT Information Services
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