Barclays shares tumble on news of £5.8bn rights issue
Barclays plans to raise £5.8bn (€6.7bn) from its shareholders to answer pressure from Britain's regulator for the bank to boost its capital strength and meet another £2bn mis-selling charge.
Barclays on Tuesday said it will offer shareholders one new share for every four owned at 185 pence in a rights issue, which offers existing shareholders the right to buy discounted shares first to avoid diluting them. The bank also plans to sell £2bn pounds of bonds that convert into equity or are wiped out if it hits trouble, and shrink its loans.
Shares in the bank fell 6pc as the amount was larger than had been earlier anticipated.
Past problems continue to haunt Barclays and its cashcall comes after the Bank of England last month told it to increase its leverage ratio - a measure of equity to assets - to reduce its risk.
That left Barclays with about a £7bn pound capital hole to fill to lift its leverage ratio to 3pc from 2.5pc under the Bank of England's methodology. Barclays had planned to improve the ratio by the end of 2015, but the central bank wanted it done more quickly.
Barclays also set aside another £2bn in its first-half results to compensate customers for mis-selling, far higher than was expected.
It set aside £1.35bn more for compensation on payment protection insurance, taking its provision for that to £4bn. British banks have now set aside more than £15bn pounds to cover payment protection insurance (PPI) compensation, and Barclays' latest move signals rivals will have to bump theirs up.
Barclays also set aside another £650m pounds for the mis-selling of complex interest rate hedging products to small firms.
Barclays reported a pretax profit of £1.7bn pounds for the six months to the end of June, almost double its £871m pound profit a year ago. Its adjusted pretax profit was £3.6bn, just below the average forecast of £3.7bn from 22 analysts polled by the company.