Barclays begs $8.9 billion to plug shortfall

Shares to be offered at massive discount

LONDON: Barclays Plc set out yesterday to raise £5.8 billion by offering shares at a massive discount to shareholders so as to fall into line with demands from regulators.

The issue, worth $8.9 billion, will be offered at almost half price and is part of a far bigger effort to plug a vast hole of £12.8 billion in the balance sheet.

Barclays made the announcement as it reported first-half results which showed a quadrupling of net profit.

The London-listed bank will also issue £2 billion of ‘‘contingent capital’’ bonds which are turned into shares or wiped out if it gets into trouble.

The plans are aimed at meeting demands made last month by the Bank of England’s Prudential Regulation Authority (PRA), which supervises the banking sector.

Following a review, the watchdog had ordered Barclays in June to increase the amount of equity it holds against total assets, a measure called the leverage ratio.

Barclays said that the moves, and separate measures to shrink parts of its business, should push its leverage ratio to above 3.0%, the minimum required by the PRA, by June 2014.

‘‘As a consequence of the PRA’s review we have had to modify our capital plans, in order to meet the 3.0% leverage ratio target,’’ said Barclays chief executive Antony Jenkins.

‘‘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.

‘‘The plan is a combination of: a rights issue; prudent reduction of our leverage exposure; issuance of additional tier one securities; and the retention of earnings and other forms of capital accretion.

‘‘We believe this represents the right combination to meet the PRA’s leverage target. It also enables us to maintain our planned lending growth and broader support of our customers and clients.’’

The bank will sell the new shares at 185 pence each, which marked a steep 40.1% discount to Monday’s closing level.

The plans emerged as the scandalhit bank admitted that it suffered a net loss of £168 million in the second quarter, or three months to the end of June, compared with a profit of £746 million a year earlier.

Barclay’s performance was rocked by a surprise £2.0-billion charge to cover compensation for the mis-selling of financial products, including £1.35 billion for unsuitable payment protection insurance.

The bank was plagued last year by the Libor rate-rigging scandal.

On a more upbeat note, Barclays added Tuesday that net profit had more than quadrupled in the first half of 2013.

Earnings after taxation surged to £671 million in the six months to the end of June, compared with £148 million in the same part of 2012.

However, Barclays added that adjusted pre-tax profit sank by 17% to £3.59 billion from £4.34 billion a year earlier.

Earnings were hit by the cost of a company-wide restructuring that was launched in the wake of the Libor scandal that tainted Britain’s banking sector.