30 Jul 2013

Barclays seeks to satisfy regulators with £5.8bn cash boost

Shares fall in banking giant Barclays after it announces a larger than expected cash call, in which it will seek £5.8bn from its investors.

Barclays seeks to raise billions in a share issue (picture: Getty)

Barclays announced on Tuesday that it would be seeking the £5.8bn injection into its finances by issuing shares at a discount to its investors.

The move is a part of a wider fundraising, aimed at boosting the banks coffers by £12.8bn, to create a cushion against future financial shocks – something demanded by regulators.

Earlier this month, the Bank of England’s Prudential Regulation Authority released a review of the extent to which the UK’s major banks had adequate capital. The leverage ratio is a measure of how risky a comany’s strategy is.

The PRA has set a leverage ratio of 3 per cent, which would reduce Barclay’s risk. This can be achieved by raising capital, or by other methods such as selling assets.

In early trading, Barclays’ shares fell by 5.6 per cent on the London Stock Exchange.

‘Bold but balanced’

Barclays said its fundraising was a “bold but balanced plan” which would see it meet the PRA’s demands by June next year. It added that its targets to lend to homes and small businesses would not be impacted.

Barclays Chief Executive Antony 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.

Mike Trippitt, analyst at Numis Securities, said: “I think they’ve done the right thing. Anything else would have been a fudge, they needed to get on and raise equity.”

Barclays’ plan was announced on the same day as its half-year results, which revealed that the bank would be putting aside an extra £2bn to cover compensation for mis-selling, including £1.35bn for payment protection insurance.

Excluding mis-selling provisions, underlying pre-tax profits fell 17 per cent to £3.6bn over the first six months of 2013. The fall in profits was attributed to Project Transform, a restructure of the business in the wake of the Libor rigging scandal last year.