) -- The U.K.'s
on Tuesday, July 30, said it would raise £5.8 billion ($8.9 billion) through a share sale to meet a new Bank of England leverage target.
Barclays will offer its investors one new share for every four they own at a price of 185 pence, more than 40% less than Barclays' Monday closing price . The London institution said the measure, along with other actions, will allow it to meet a 3% leverage target by June 2014. The Bank of England's Prudential Regulation Authority last month sprung the goal on lenders as part of a wider review of bank capital and revealed that both Barclays and mutually owned Nationwide Building Society had fallen short of the target. After lobbing by Nationwide, which argued that the "blunt" target made no allowances for the fact most of its loans were low-risk mortgages, the PRA gave the mutual until the end of 2015 to hit the 3% ratio.
Barclays also Tuesday said it would raise up to £2 billion through the issue of other qualifying Tier One securities; reduce leverage by £65 billion to £80 billion though "risk management actions"; and retain earnings to boost capital. It decided against accelerating asset sales because of the damage it would do to its business, it said.
"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," said Barclays Chairman David Walker in a statement. "The Board and I are aware of the implications of a rights issue for shareholders. We hope to balance this with reduced uncertainty in the outlook for Barclays and with enhancement of our dividend payout from 2014."
Barclays released the announcement along with first-half results which showed net profit fell 22% to £2.47 billion because of restructuring charges. During the period Barclays took £2 billion in charges to meet the cost of compensation to consumers and small businesses who were "missold" insurance and interest-rate hedging products, respectively. Total first-half income slipped 3% to £15.1 billion.
A banking syndicate including
Bank of America Merrill Lynch
will underwrite Barclays' rights issue.
Written by Laura Board