CONCERNS about a multi-billion pound share issue and more provisions for mis-selling weighed heavily on Barclays yesterday.
Its shares were down four per cent on the FTSE 100 Index amid speculation the banking giant is mulling a dilutive £4bn rights issue to satisfy regulators’ concerns about its financial strength.
The bank’s advisers reportedly sounded out investors about a potential rights issue last week as it looks for ways of meeting tough new demands from the Bank of England over capital levels.
Barclays is expected to raise fresh funds by issuing shares or selling bonds which convert into equity, and said it will reveal plans to appease regulators alongside its first-half results today. The bank said it “noted speculation” about a share issue and has been talking to regulators.
Banking analyst Ian Gordon of Investec Securities said a multi-billion pound share issue would be disappointing and unnecessary.
The lender is also expected to report bigger-than-expected provisions to account for previous mis-selling of interest rate swaps, payment protection insurance (PPI) and identity fraud protection.
The bank has already set aside £2.6bn to cover the PPI scandal, which saw thousands of its borrowers sold loan re-payment cover they did not need or could not claim on. The bank has also set aside £850m to repay small businesses sold complex interest rate swaps. It could also reveal compensation for Barclaycard customers sold identity fraud and credit card cover on behalf of embattled card insurer CPP.
Mr Gordon said: “If Barclays has the courage to say no (to an equity issue), we would see further upside, but sadly, this appears less likely.
“We don’t believe Barclays would contemplate raising as much as £7bn equity. A smaller sum, perhaps £2bn to £4bn, seems plausible, even if unnecessary.”
He expects the bank to set aside another £200m for PPI and £400m for interest rate swaps.
Barclays chief executive Antony Jenkins has criticised the leverage ratio as “crude” and said it would hit the target by 2015.