Barclays passes up discount to fight Qatari funding fine

Barclays is continuing to fight the City watchdog’s attempt to fine it £50m over the Qatari fundraising that staved off a taxpayer-funded bailout during the financial crisis.

The bank admitted the looming penalty as it unveiled final details of a deeply discounted one-for-four, right issue. The new shares are being offered at 185p to raise £6bn, designed to bolster Barclays’ capital base and satisfy the demands of the Bank of England.

Barclays admitted that it had received a final warning notice from the Financial Conduct Authority, but disputes its findings and the scale of the fine. In fighting the penalty it is passing up a discount for settling early.

If the dispute continues the case could be presented to the watchdog’s Regulatory Decisions Committee, and could then be appealed before a tribunal.

While individuals who have fallen foul of the regulator have proved willing to take this step, it is much rarer for companies, and particularly big companies, to do so.

The bank revealed that it had agreed to two deals to pay advisers a total of £322m over five years for raising funds from Qatar in 2008, which raised enough cash to keep Barclays free of government involvement.

Only one of these agreements was made public at the time and the amount involved was never disclosed. The FCA argues that the payments were made direct to the Qataris, not advisers, and has accused Barclays of behaving recklessly because it was in breach of Stock Exchange listing rules.

As the Serious Fraud Office is also investigating, the watchdog’s warning notice can not be made public and the expectation in the City is still that a settlement will ultimately be reached.

News of the penalty complicated the announcement of the rights issue prospectus, but investors were just as concerned by Barclays admission that its income fell by £500m in July and August against a year ago, which leaves its income so far this year down 5 per cent on the same point in 2012.

It said its investment banking income in the past two months had been significantly below the same months in 2012.

Ian Gordon, an analyst at Investec, said: “Frankly, from a purely financial perspective, we regard £50m as a source of relief! We were forecasting a decline from £7bn in quarter three 2012 to £6.8bn in quarter three 2013, so the outturn appears worse, with Barcap income ‘significantly below’ July-August 2012. In this context, underlying costs being ‘on track’ to meet an £18.5bn target offers little consolation.”

However, Mr Gordon thinks Barclays will have better news on the cost-cutting front.

Barclays shares eventually finished the day up 3.8p at 305.4p. That means that the rights issue, fully underwritten by Credit Suisse, Deutsche Bank, BoA Merrill Lynch and Citi, is not in any doubt.

Five troubled years: Barclays timeline

2008

Barclays sells £12bn-worth shares to investors rather than turn to the Government for a bailout during the financial crisis. Challenger and a subsidiary of the Qatar Investment Authority, run by the Gulf state’s prime minister, Sheikh Hamad bin Jassim bin Jaber al-Thani, put up more than £6bn

2009

Barclays sells its asset management arm to the US fund manager Black Rock in December for $15.2bn (£9.5bn)

2010

Global regulators launch investigations into allegations of Libor manipulation by banks including Barclays

2011

1 January Bob Diamond takes over as chief executive at Barclays from John Varley

2012

June Barclays is fined $453m in settlement with US and UK regulators over manipulating Libor rates

July 3 Bob Diamond resigns

18 August UK parliamentary report says Barclays company culture is “deeply flawed”

29 August The Serious Fraud Office opens criminal inquiry into payments between Barclays and a subsidiary of QIA

30 August Antony Jenkins becomes chief executive

2013

Sept Barclays admits it is fighting a £50m Financial Conduct Authority fine for breaching listing rules when it raised capital from Qatari investors