* UK regulator identifies 12.8 bln stg capital gap at bank
* Barclays plans 5.8 bln stg rights issue, sale of 2 bln
* Announces further 2 bln stg charge for mis-selling
* Says to fight UK watchdog findings on 2008 Qatar probe
* Shares close 5.7 percent lower
(Adds comments from investors)
By Steve Slater and Matt Scuffham
LONDON, July 30 Barclays is raising 5.8
billion pounds ($8.9 billion) from its shareholders to help plug
a larger-than-expected capital shortfall identified by Britain's
financial regulator at the bank.
The Bank of England's Prudential Regulation Authority (PRA)
said on Tuesday Barclays needed an extra 12.8 billion pounds to
strengthen its capital reserves against potential market shocks.
That was higher than an estimate of about 7 billion a month
ago, due mainly to tougher European rules on the way banks
The PRA gave the 320-year-old bank a year to fill the gap,
requiring it to turn to shareholders to speed up its plan to
"I think they've done the right thing. Anything else would
have been a fudge, they needed to get on and raise equity," said
Mike Trippitt, analyst at Numis Securities.
Barclays, Britain's third-biggest bank and the sixth-largest
in Europe, announced the fundraising alongside another 2 billion
pound charge for mis-selling products and said it was also
pushing back a profitability target.
Banks across Europe are battling to meet tougher regulations
aimed at preventing a repeat of the financial crisis, and many
are also struggling to move on from past misdeeds. Deutsche Bank
, for example, missed second-quarter profit forecasts
on Tuesday, hit by higher legal costs.
Barclays also continues to be haunted by a fundraising with
Qatari investors in 2008, which is being investigated by British
and U.S. authorities. The bank said Britain's Financial Conduct
Authority made preliminary findings against it on June 27, which
it is contesting.
Barclays Chief Executive Antony Jenkins said he was reacting
"quickly and decisively" to the PRA's demands and the regulator
was happy with his plan. It also includes selling 2 billion
pounds of bonds that convert into equity or are wiped out if the
bank hits trouble, and shrinking loans by a further 65-80
billion pounds or more, notably in the investment bank.
"What we're doing today is all about certainty...it's about
certainty on capital, certainty on timing and certainty on
conduct risk. That's what really matters to shareholders," said
Jenkins, who took over last August.
Standard Life, one of the biggest investors in Barclays and
the UK stock market, criticised regulators for a "lack of
stability or consistency" in capital requirements.
The regulatory regime "appears both capricious and hostile
to banks and is in consequence raising the cost of capital for
the banking sector," said David Cumming, head of equities at
Standard Life Investments.
Another of the 20 largest investors in Barclays said the
bank's strained relationship with its regulator in the past had
probably not helped. "I do slightly wonder whether they are
paying the price for the hubris of the past," he said.
Rights issues cut earnings per share, and Barclays shares
closed 5.7 percent lower at 290.3 pence, the weakest performance
in the European bank index.
The rights issue, the biggest by a British bank since 2009,
will offer shareholders one new share at 185 pence - 40 percent
below Monday's closing price - for every four currently owned.
It will raise the equivalent of 15 percent of Barclays'
market value and allow existing shareholders to buy discounted
shares first, giving them a chance to maintain their stakes and
avoiding the criticism that the 2008 fundraising was too
generous to new investors.
Regulators are increasing scrutiny of leverage ratios, which
do not rely on banks' own risk assessments but express a bank's
capital as a proportion of its overall assets.
Barclays said the PRA had estimated its leverage ratio at
2.2 percent at the end of June, lower than the 2.5 percent
estimated last month, and compared with the regulator's goal for
banks to have a ratio of at least 3 percent by June 2014.
Barclays said it was pushing back its target to deliver a
return on equity above its cost of equity - previously 11.5
percent - to 2016, a year later than Jenkins set out in a
far-reaching restructuring unveiled in February.
But it bumped up its dividend payout expectations, saying it
planned to distribute 40-50 percent of earnings in 2014 compared
with the 30 percent previously predicted.
Barclays set aside another 1.35 billion pounds to compensate
customers mis-sold payment protection insurance (PPI), taking
its total provision for that to 4 billion pounds.
British banks have now put aside more than 15 billion pounds
to cover PPI compensation, and Barclays' latest move signals
rivals may have to bump up provisions too.
Barclays also set aside 650 million pounds more for
mis-selling complex interest rate hedging products to small
The bank reported a pretax profit of 1.7 billion pounds for
the six months ended June, almost double its 871 million pound
profit a year ago. Its adjusted pretax profit was 3.6 billion
pounds, just below the average forecast of 3.7 billion.
It was cautious on the outlook and operating environment and
said it would speed up cost-cutting. The bank spent 640 million
pounds on restructuring in the first half.
Barclays will pay about 130 million pounds in fees and
commission on the underwritten rights issue. The offer will be
launched in September, and new shares are due to be issued on
($1 = 0.6515 British pounds)
(Additional reporting by Chris Vellacott and Laura Noonan;
Editing by Mark Potter and Erica Billingham)