Barclays chief executive Antony Jenkins has confirmed the bank will launch a £5.8bn rights issue after it revealed a hole in its balance sheet worth £12.8bn.
Not surprisingly, the bank's shares fell 5.5% in early trading. The gap is related to new leverage rate requirements introduced by the Prudential Regulation Authority. Under the new measure introduced by the PRA, Barclays' leverage ratio is 2.2% - or £12.8bn.
In order to meet the new 3% target to be introduced by the Prudential Regulation Authority by June next year, the bank's board has come up with a 'bold but balanced' plan - 'a combination of: a rights issue; prudent reduction of our leverage exposure; issuance of additional tier 1 securities; and the retention of earnings and other forms of capital accretion,' said Jenkins.
'We believe this represents the right combination to meet the PRA's leverage target. It also enables us to maintain our planned lending growth and broader support of our customers and clients,' he added.
Jenkins could use the new rules like he could use, well, a hole in the balance sheet. Having taken the reins at the bank less than a year ago, he has since had to deal with the never-ending PPI saga, plus the closure of BarCap, the bank's investment arm, and a series of ever-tougher restrictions on capital from legislators at home and abroad.
So it's no wonder the bank posted a 17% fall in profits before tax this morning: in the six months to the end of June, the figure dropped to £3.6bn, down from £4.3bn over the same period last year.
The statement showed the PPI saga is just getting worse: in the last six months, Barclays set aside £1.3bn to pay back missold payment protection insurance, up from just £300m last year. It also shelled out £650m in relation to interest rate hedging products redress, up from £450m last year.
Revenues also dropped - although by a more modest 2%, from £13.8bn to £13.4bn.
But Jenkins was keen to point out that times at Barclays are a-changing. No longer the hard-nosed (Diamond-nosed) attitudes of old. Barclays wants to be a softer bank, a cuddlier bank.
'To this end, I am pleased to say that 95% of our colleagues have now attended a half day Values workshop,' finished Jenkins. Next time MT visits its bank manager, it expects nothing less than a hug...
