Barclays fights FCA over Qatar fundraising

Bank will issue £5.8bn in shares to plug a £12.8bn capital shortfall

Barclays is steeling itself for imminent developments from the financial regulator over its controversial fundraising from sovereign wealth funds at the height of the financial crisis in 2008.

The news emerged as Barclays detailed plans for a bigger-than-expected £5.8bn rights issue to satisfy the new banking regulator, which has identified that Britain's second-biggest bank needs an extra £12.8bn of capital.

Barclays said that it expects further developments in the inquiry into its 2008 fund raising from Qatar which is being investigated by both the Serious Fraud Office (SFO) and Financial Conduct Authority (FCA).

It said it had received the FCA's preliminary findings at the end of June and had sent back its response "contesting" those findings last week. It added: "Barclays expects further developments in the near term."

The investigation, which centres on four individuals, including the outgoing finance director Chris Lucas, and the bank itself, is looking at whether Barclays lent money to the Qataris to buy shares during the £4.5bn fund raising from sovereign wealth funds.

Earlier this week the SFO was given an extra £2m by the Treasury to speed up its investigation.

Barclays shares fell 17.5p, or 5.7 per cent, to 291.3p yesterday, having fallen 3.5 per cent on Monday when the talk was that the rights issue would be closer to £4bn than £6bn.

The right issue, which will be launched in September, will involve existing shareholders being offered one new share for every four they own at 185p a share – a 40 per cent discount to Monday's closing price but still well below the theoretical ex-rights price of 270p.

Barclays will collect £5.8bn after expenses through the massive issue of new shares as part of its plan to plug the £12.8bn shortfall identified by the Prudential Regulation Authority (PRA). The bank also took another £2bn hit for mis-selling payment protection insurance and interest rate swaps, taking the total set aside for mis-selling to £5.5bn.

But in a sweetener to investors, Barclays said that once it had closed the capital gap, it would be able to increase its dividend payouts by more than expected from 2014. The chief executive, Antony Jenkins, who took over after Bob Diamond quit in the wake of the Libor-rigging scandal last year, said: "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."

Barclays' first-half profits fell 17 per cent to £3.59bn, which was slightly below City estimates and included a £640m charge for Mr Jenkins' restructuring plan, which aims to save £1.5bn in annual costs and will see a total of 3,700 jobs go by 2015.

The PRA and Bank of England said they welcomed Barclays' move, calling it "a credible plan to meet a leverage ratio of 3 per cent, after adjustments, by June 2014 without cutting back on lending to the real economy."

Barclays will sell up to an extra £80bn of assets, raise another £2bn through the issue of "CoCos", loss-absorbing securities, and retain more of its earnings in order to meet the £12.8bn target.

Mr Jenkins said: "The board and I are aware of the implications of a rights issue for shareholders. We hope to balance this with reduced uncertainty in the outlook for Barclays and with enhancement of our dividend payout from 2014."

He added that once the new capital was in place, Barclays could increase the amount of earnings it pays in dividends to shareholders – from his original target of 30 per cent to somewhere between 40 per cent and 50 per cent.

Barclays is paying about £150m in fees for the rights issue, much of which will go to the lead underwriters and bookrunners: Credit Suisse, Deutsche Bank, Bank of America Merrill Lynch and Citi.

The overall underwriting fee is back down to 1.7 per cent, which is half the level such fees rose to during the peak of the financial crisis between 2007 and 2009.