UK: Barclays announces £5.8bn cash call as first half profits fall 17%

Barclays is making a bigger-than-expected £5.8bn cash call on investors

Barclays is making a bigger-than-expected £5.8bn cash call on investors - Credit: PA

Banking giant Barclays today revealed plans for a mammoth £5.8billion investor cash call to meet City regulator demands to shore up its finances.

The group is to tap investors by issuing new shares at a discounted price as part of a fundraising to boost its balance sheet by another £12.8bn, on top of billions of pounds already being raised by the bank to build up a cushion against future financial shocks.

Details of the move came as half-year results also revealed an extra £2bn charge to cover compensation for mis-selling, including £1.35bn for payment protection insurance.

Excluding mis-selling provisions, underlying pre-tax profits fell 17% to £3.6bn over the first six months of 2013 as the bank counted the cost of a group-wide restructure launched in the wake of its Libor rate-rigging settlement last year.

Barclays said its fundraising was a “bold but balanced plan” which would see it meet regulator demands by June next year. It stressed it would not impact on its aims to boost lending to households and businesses.

However, shares fell 5% in early trading as the rights issue was far higher than expected and as Barclays admitted its plans will put back some of the financial targets under its overhaul, dubbed Project Transform.

The bank will also issue £2 billion of bonds that are turned into shares or wiped out if the bank gets into trouble.

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Barclays chief executive Antony Jenkins said: “I am certain the decisive and prompt action we are taking will leave Barclays stronger.”

The Prudential Regulation Authority (PRA) said it had “agreed and welcomed” the bank’s plans to bolster its reserves.

Mr Jenkins sparked a spat with the PRA in recent weeks after suggesting that the bank may be forced to cut lending to meet the stringent new demands.

But a Bank of England spokesman said the measures being taken were “credible” and would not cut back on lending to the wider economy.

Today’s half-year figures come after a difficult start to 2013 for Barclays, which continues to be hampered by scandals and a mounting bill for mis-selling.

As well as further cash put by for PPI redress, the bank also said it will set aside another £650 million for mis-selling of interest rate swap products sold to small businesses.

This takes its total mis-selling bill to an eye-watering £5.5bn so far.

The bank’s compensation charge for PPI alone has reached £4bn and Barclays said a drop-off in claims per month has not been as quick as expected, despite falling by 46% since the peak in May 2012.