Barclays issues £5.8bn new shares as it reveals £12.8bn shortfall

Cash call is part of fundraising plan to boost balance sheet by £12.8bn

Barclays is to tap investors by issuing new shares at a discounted price as part of a fundraising to boost its balance sheet by another £12.8 billion (PA)

Banking giant Barclays today revealed plans to plug up a £12.8bn shortfall identified by the City watchdog through an issue of £5.8bn-worth of new shares.

Barclays also took another £2 billion hit for mis-selling payment protection insurance and interest rate swaps, taking the total set aside for mis-selling to £5.5 billion.

However, in a sweetener to investors, the bank said that once it had closed the capital gap identified by the Prudential Regulation Authority (PRA), it would be able to increase its dividend payouts by more than expected from 2014.

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 £3.59 billion, which was slightly lower than City estimates and included a £640 million charge for Jenkins’ restructuring plan, which aims to save £1.5 billion in annual costs and will see a total of 3,700 jobs go by 2015.

Under the rights issue, existing shareholders will be offered one new share for every four they own at 185p a share, which is a 40 per cent discount to last night’s closing price. Today Barclays shares dropped more than 6 per cent to 287.80p by mid-afternoon but are still up more than 12 per cent this year.

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 additional £80 billion of assets, raise another £2 billion through the issue of “CoCos”, loss-absorbing securities, and retain more of its earnings in order to meet the PRA’s £12.8 billion target.

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 is 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 some £150 million 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.