Barclays to raise £5.8b from rights offer

PUBLISHED : Tuesday, 30 July, 2013, 10:02am
UPDATED : Wednesday, 31 July, 2013, 1:48am

Barclays, Britain's second-largest bank by assets, said it would raise £5.8 billion (HK$69.2 billion) in a rights offering to bolster capital as it booked its biggest charge to date for customer compensation.

The lender would offer investors one new share for every four shares they already owned for 185 pence, 40 per cent less than Monday's closing price, Barclays said yesterday. It will also shrink assets by £80 billion and sell about £2 billion of loss-absorbing securities to meet calls by the British regulator to reduce leverage.

"After careful consideration of the options, the board and I have determined that Barclays should respond quickly and decisively," chief executive Antony Jenkins said.

The stock offering, the largest by a British bank in almost four years, marks the biggest setback for Jenkins since he became chief executive after the lender's £290 million fine for rigging interest rates last year. He had sought to plug the capital deficit using contingent convertible bonds. The Prudential Regulation Authority, which found Barclays had the least capital as a proportion of its assets of Britain's four biggest banks, pushed it to sell stock.

"The £5.8 billion equity increase is much larger than consensus expectations," Andrew Coombs, an analyst at Citigroup, wrote in a note to clients.

The lender would set aside £2 billion to cover the cost of redress for clients sold insurance on loan repayments they did not need and interest-rate hedging products that lost them money, Barclays said. Yesterday's charge brings the amount Barclays has set aside to cover compensation to £5.4 billion, second only to Lloyds Banking's £7.2 billion.

The stock has jumped 18 per cent this year, making it the second-best performer among Britain's five largest banks after Lloyds.

Pre-tax profit excluding gains and losses on the bank's own debt and compensation charges fell to £3.59 billion from £4.34 billion a year earlier, missing the £3.7 billion estimate of 22 analysts surveyed.