Barclays’ Share Price Plunges on ₤5.8 Billion Cash Call Announcement

on Jul 30, 2013
Listen Tuesday July 30th: Barclays’ share price (LON:BARC) plunged by 5.45 percent to 292.20p at the London opening today after the UK bank reported profit before tax below consensus estimate and said it planned to raise ₤5.8 billion from its shareholders to reach the leverage ratio required by British financial regulators.

Adjusted profit before tax for the half year declined by 17 percent or ₤748 million to ₤3.591 billion on the back of costs related to CEO Antony Jenkins’ “Transform” programme. The bank’s consensus estimate for profit before tax was ₤3.689 billion. Income at Barclays’ Investment Bank was stable at ₤6.473 billion driven by increases in Equities and Prime Services as well as Investment Banking and offset by a decrease in Fixed Income, Currency and Commodities (FICC).

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In order to achieve the three percent leverage ratio required by the Prudential Regulation Authority (PRA) Barclays revealed on Tuesday that it would offer shareholders one new share for every four owned at 185.00p in a rights issue. “This represents a discount of approximately 40.1% to the closing price on the
London Stock Exchange of 309.05p per ordinary share on 29 July 2013 … and a discount of approximately 34.9% to the theoretical ex-rights price based on the closing price,” Barclays said in its interim statement.

Underwriters for the rights issue, the largest by a British bank in almost four years, will include Credit Suisse, BofA Merrill Lynch, Citi and Deutsche Bank. Barclays also plans to issue ₤2 billion of “contingent capital” bonds that convert into shares or are wiped out if it hits trouble.
Barclays announced a total of ₤2 billion in provisions for mis-selling complex financial products to customers. About ₤1.35 billion were set aside for compensation on payment protection insurance (PPI) – far above the ₤600-₤800 million expected by analysts. PPIs were designed to cover loan repayments for policyholders who had an accident, lost their jobs or became ill, yet the product was sold on a massive scale to clients who didn’t need or want it.

!m[UK Bank Reports 17% Decline in First Half Adjusted Profit before Tax](/uploads/story/4419/thumbs/pic1_inline.jpg)
**Bank of England Welcomes Barclays’ Capital Plan**
A spokesperson for the Bank of England said today that the central bank welcomed Barclays’ new capital plan to meet regulators’ demands to reach a leverage ratio of three percent: “We have considered all elements of the plan, including new capital issuance, planned dividends and management actions to be taken and, based on Barclays’ projections, conclude that it is a credible plan to meet a leverage ratio of 3%, after adjustments, by June 2014 without cutting back on lending to the real economy.”
**Barclays’ share price was 291.69p as of 30.07.2013, 08.08 BST.**


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