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Barclays to seek cash as £7bn capital hole looms
Barclays could on Tuesday announce plans to raise billions of pounds from shareholders as provisions against past mis-selling scandals continue to rise.
Barclays was one of only two firms whose net UK lending was more than £1bn in the first quarter Photo: Bloomberg News
By Harry Wilson, Banking Editor
11:23PM BST 28 Jul 2013
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The bank has been in talks with investors to launch a £4bn rights issue as part of a fundraising programme aimed at filling a capital hole thought to be as large as £7bn.
Barclays has been in talks in recent weeks with Britain’s banking regulator, the Prudential Regulation Authority, about how to meet a new leverage ratio requirement that will force lenders to hold equity capital equivalent to 3pc of their total outstanding loans.
Banks had expected to have several years to meet the leverage ratio, but the Bank of England has decided to accelerate the rule’s implementation.
The capital raising is expected to be announced when Barclays reports its first-half financial results on Tuesday, with City analysts forecasting a pre-tax profit of £3.7bn, down about £600m on the same period in 2012.
Payment protection insurance provisions are expected to rise by as much as £800m and Barclays is also expected to make a further large provision against interest rate swap mis-selling claims.
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Barclays has so far set aside £2.6bn against PPI claims and £850m for interest rate swap mis-selling redress.
The results will also see Barclays reveal that Sir Mike Rake, its deputy chairman and one of the key architects of the bank’s turnaround in the wake of the Libor-rigging scandal last year, is to slim down his responsibilities.
It is understood the former chairman of KPMG International will stand down as chairman of the bank’s audit committee to free up time to devote to his new role as president of the CBI and his chairmanship of BT.
The Barclays results will kick off the second-quarter reporting season for British banks, with Lloyds Banking Group and the Royal Bank of Scotland both set to publish their latest financial figures this week.
Lloyds, which will report its results on Thursday, is forecast to have made a pre-tax profit of more than £3bn in the first half of the year, according to City analysts, compared to a loss in the same period in 2012.
The bank is expected to say its own PPI mis-selling provisions have increased by about £300m to around £7bn, the largest amount of money set aside by any lender.
A strong set of results could open the path to a quick sale of some of the state’s 39pc shareholding in Lloyds, with expectations growing that the Government could sell shares worth about £5bn within the next month.
RBS will release its own results on Friday and is expected to have made a second-quarter pre-tax profit of £910m, nearly double the amount it made in the same period last year.
However, the bank’s results could be overshadowed by the announcement of a successor to outgoing chief executive Stephen Hester.
Ross McEwan, the head of RBS’s retail banking business, is understood to be the leading candidate to replace Mr Hester, who will leave the bank at the end of the year.
The appointment will require the approval of the bank’s board, which is due to meet on Thursday, as well as UK Financial Investments, which manages the taxpayer’s 81pc holding.
Barclays to seek cash as £7bn capital hole looms
Barclays could on Tuesday announce plans to raise billions of pounds from shareholders as provisions against past mis-selling scandals continue to rise.
Barclays was one of only two firms whose net UK lending was more than £1bn in the first quarter Photo: Bloomberg News By Harry Wilson, Banking Editor
11:23PM BST 28 Jul 2013
14 Comments The bank has been in talks with investors to launch a £4bn rights issue as part of a fundraising programme aimed at filling a capital hole thought to be as large as £7bn.
Barclays has been in talks in recent weeks with Britain’s banking regulator, the Prudential Regulation Authority, about how to meet a new leverage ratio requirement that will force lenders to hold equity capital equivalent to 3pc of their total outstanding loans.
Banks had expected to have several years to meet the leverage ratio, but the Bank of England has decided to accelerate the rule’s implementation.
The capital raising is expected to be announced when Barclays reports its first-half financial results on Tuesday, with City analysts forecasting a pre-tax profit of £3.7bn, down about £600m on the same period in 2012.
Payment protection insurance provisions are expected to rise by as much as £800m and Barclays is also expected to make a further large provision against interest rate swap mis-selling claims.
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Barclays has so far set aside £2.6bn against PPI claims and £850m for interest rate swap mis-selling redress.
The results will also see Barclays reveal that Sir Mike Rake, its deputy chairman and one of the key architects of the bank’s turnaround in the wake of the Libor-rigging scandal last year, is to slim down his responsibilities.
It is understood the former chairman of KPMG International will stand down as chairman of the bank’s audit committee to free up time to devote to his new role as president of the CBI and his chairmanship of BT.
The Barclays results will kick off the second-quarter reporting season for British banks, with Lloyds Banking Group and the Royal Bank of Scotland both set to publish their latest financial figures this week.
Lloyds, which will report its results on Thursday, is forecast to have made a pre-tax profit of more than £3bn in the first half of the year, according to City analysts, compared to a loss in the same period in 2012.
The bank is expected to say its own PPI mis-selling provisions have increased by about £300m to around £7bn, the largest amount of money set aside by any lender.
A strong set of results could open the path to a quick sale of some of the state’s 39pc shareholding in Lloyds, with expectations growing that the Government could sell shares worth about £5bn within the next month.
RBS will release its own results on Friday and is expected to have made a second-quarter pre-tax profit of £910m, nearly double the amount it made in the same period last year.
However, the bank’s results could be overshadowed by the announcement of a successor to outgoing chief executive Stephen Hester.
Ross McEwan, the head of RBS’s retail banking business, is understood to be the leading candidate to replace Mr Hester, who will leave the bank at the end of the year.
The appointment will require the approval of the bank’s board, which is due to meet on Thursday, as well as UK Financial Investments, which manages the taxpayer’s 81pc holding.