Barclays £5.8bn cash call part of 'bold' plan

Barclays is to tap shareholders for £5.8bn after revealing a £12.8bn hole in its finances

Barclays Bank
Barclays Bank

Barclays is to tap shareholders for £5.8bn after revealing a £12.8bn hole in its finances.

The cash call is part of a “bold but balanced plan“ to meet City regulator demands to shore up its finances by June next year.

It insisted the move would make the bank stronger and would not impact on its aims to boost lending to households and businesses.

But the group’s shares slumped as the scale of the fundraising took the City by surprise and as Barclays revealed a higher-than-expected bill for yet more mis-selling provisions.

It set aside another£2bn charge to cover compensation for mis-selling, including £1.35bn for payment protection insurance and £650m for controversial interest rate swaps.

Excluding mis-selling provisions, underlying pre-tax profits fell 17% to £3.6bn over the first six months of 2013 as the bank counted the cost of a group-wide restructure launched in the wake of its Libor rate-rigging settlement last year.

Barclays chief executive Antony Jenkins confirmed that Barclays was likely to cut its 2013 bonus pool as a result of the further mis-selling provisions.

He said there were set to be further moves to shrink the investment banking arm, which has already seen around 1,600 jobs axed.

Jenkins said the bank saw “good momentum“ in the first half, but admitted its fundraising plans will put back some of the financial targets under its overhaul, dubbed Project Transform.

The group is to issue new shares at a discounted price to investors to meet the City regulator’s requirements to strengthen its leverage ratio – a key measure of financial strength – to 3% from 2.2%.

This comes on top of billions of pounds already being raised by the bank to build up a cushion against future financial shocks as part of a wider capital raising across the industry.

The bank will also issue £2bn of bonds that are turned into shares or wiped out if the bank gets into trouble.In addition, the balance sheet would be shrunk by between £65bn and £80bn, while earnings would be retained to make up the balance of the capital gap.

Mr Jenkins said: “I am certain the decisive and prompt action we are taking will leave Barclays stronger.”

The Prudential Regulation Authority (PRA) said it had “agreed and welcomed“ the bank’s plans to bolster its reserves.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said Barclays faces a “long and complex“ road to recovery.

Costs of the bank’s overhaul – at £640m – were largely behind the profits slide, while income at its investment bank remained largely flat at £6.5bn in the first half after a 13% quarter on quarter slide in the three months to June 30. On a statutory basis, profits rose by £806m to £1.7bn.

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