Barclays plans $9 billion cashcall after mis-selling hit

Barclays Bank
Adam Jeffery | CNBC

Barclays plans to raise 5.8 billion pounds ($8.9 billion) from its shareholders to answer pressure from Britain's regulator for the bank to boost its capital strength and meet another 2 billion pound mis-selling charge.

Barclays on Tuesday said it will offer shareholders one new share for every four owned at 185 pence in a rights issue, which offers existing shareholders the right to buy discounted shares first to avoid diluting them. The bank also plans to sell 2 billion pounds of bonds that convert into equity or are wiped out if it hits trouble, and shrink its loans.

On Tuesday, Barclays' shares closed around 5.7 percent lower.

"Restructuring costs and further provisions for customer redress weighed on Barclays' otherwise decent first half 2013 financial results. But this morning's numbers were obviously overshadowed by the announcement of the bank's plans for further enhancing capital buffers and, in particular, satisfying the Prudential Regulation Authority's newly-introduced 3 percent leverage ratio target," analysts at Daiwa Capital Markets said in a morning note.

Past problems continue to haunt Barclays and its cashcall comes after the Bank of England last month told it to increase its leverage ratio - a measure of equity to assets - to reduce its risk.

That left Barclays with about a 7 billion pound capital hole to fill to lift its leverage ratio to 3 percent from 2.5 percent under the Bank of England's methodology. Barclays had planned to improve the ratio by the end of 2015, but the central bank wanted it done more quickly.

Barclays also set aside another 2 billion pounds in its first-half results to compensate customers for mis-selling, far higher than was expected.

It set aside 1.35 billion pounds more for compensation on payment protection insurance, taking its provision for that to 4 billion pounds. British banks have now set aside more than 15 billion pounds to cover payment protection insurance (PPI) compensation, and Barclays' latest move signals rivals will have to bump theirs up.

Barclays also set aside another 650 million pounds for the mis-selling of complex interest rate hedging products to small firms.

Barclays reported a pretax profit of 1.7 billion pounds for the six months to the end of 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 pounds from 22 analysts polled by the company.