Barclays to sell shares to fill big capital hole

Jul 30, 2013, 4:48 AM EDT

LONDON (AP) — British bank Barclays said Tuesday it will sell 5.8 billion pounds ($8.9 billion) in new shares to make up for a big capital shortfall on its balance sheet and satisfy new regulatory requirements meant to prevent a repeat of the 2008 financial crisis.

The sale of shares to existing shareholders was announced along with the bank's earnings statement, and came after the Prudential Regulation Authority told Barclays and other lenders to increase their capital as a buffer against future crises. Barclays said its so-called leverage ratio was 2.2 percent compared with the new requirement of 3 percent. That translates to a shortfall in capital of 12.8 billion pounds.

"After careful consideration of the options, the board and I have determined that Barclays should respond quickly and decisively to meet this new target," Chief Executive Antony Jenkins said in a statement.

Shares in the bank fell 4.5 percent on the news of the share issue and the size of the capital shortfall.

The regulator's report increased pressure on banks, which are being ordered to hold more capital even as they are being pushed to lend to businesses and families to kick-start the economy.

The plan to address the capital shortfall calls for, besides the rights issue, also a reduction in leverage exposure and the retention of earnings and other forms of capital. The bank will also issue 2 billion pounds of bonds that could be easily converted into shares — or eliminated if the bank gets into trouble.

Barclays reported net income of 671 million pounds in the first half of 2013 compared with 148 million pounds last year.