Barclays to raise £5.8bn in rights issue

Barclays said today that it is planning to raise £5.8bn through an underwritten rights issue.

The bank will offer its existing shareholders one share for every four owned at a cost of £1.85. It said this represents a discount of around 40.1pc on the closing price of £309.05 per share on the London Stock Exchange yesterday.

The decision follows the introduction by the Prudential Regulation Authority (PRA) of a 3pc leverage ratio target. Barclays’ PRA leverage ratio stands at 2.2pc, representing a gap of £12.8bn. The underwritten rights issue is part of a series of measures designed to achieve the 3pc target by June 2014.

“After careful consideration of the options to meet the PRA request for a 3pc leverage ratio by June 2014, the Board has decided on a set of actions, including the rights issue, to meet this target, whilst continuing to deliver our strategy under the Transform programme,” said the bank’s chairman, Sir David Walker.

“The PRA has agreed and welcomes our plan.

“As a result we expect Barclays to be in an even stronger capital position, allowing us to increase the dividend payout ratio ahead of the original Transform target.

“The board expects that Barclays will continue to reduce leverage further, whilst maintaining target capital levels, and will aim to do so in a way that achieves sustainable returns above the cost of equity.”

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Chief executive Anthony Jenkins said the bank remains committed to the objectives set out in the Transform programme to achieve its goal of becoming the ‘Go-To’ bank.

“Just five months into our plan I believe we are building good momentum,” he said.

“As a consequence of the PRA’s review we have had to modify our capital plans, in order to meet the 3pc leverage ratio target by June 2014.

“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 1 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.”

Grainne Rothery