Barclays completed its £5.8 billion (US$9.4 billion) fundraising today to meet a capital shortfall identified by its regulator, after almost 95 per cent of the British bank's investors stumped up more cash.
Barclays launched its rights issue three weeks ago, prompted by the British regulator's demand that it improve its leverage ratio – a measure of its capital to assets – to 3% by mid-2014.
Barclays said bookrunners for the offer sold the shares that were not taken up by investors – worth £463 million – at 268 pence apiece, or a 1.8% discount to yesterday's close.
Barclays shares were down 0.1% at 272.8p by 1110 GMT, which dealers said was a resilient performance and reflected the modest size of the leftover shares.
The bank also plans to sell £2 billion of bonds that convert into equity if the bank hits trouble and to shrink the balance sheet of its investment bank to help it meet its leverage ratio target.
"Post the rights issue the regulatory risks have been reduced but not eliminated," said Mike Trippitt, analyst at Numis Securities, saying there could be "pressure to deleverage the business further".
The rights issue was the biggest by a British bank since 2009 and raised the equivalent of 15% of Barclays' market value.
Antony Jenkins, who took over as chief executive a year ago, is trying to rebuild Barclays' reputation after a string of scandals. He said the rights issue would deal "quickly and decisively" with the British regulator's demands.
Investors have broadly welcomed his turnaround plan, although he still faces challenges to improve profitability and tackle a raft of legacy issues. The rights issue forced him to push back his target to deliver a return on equity above about 11.5% by a year to 2016.
A slowdown in income from selling bonds and interest rate products, the core business for investment banks, will hurt third quarter profits across the industry.
Barclays' rights issue prospectus also said it faced a £50 million fine from Britain's Financial Conduct Authority for its failure to adequately disclose fees it had paid Qatari investors over the last five years.
Those fees, linked to fundraising in 2008, continue to be investigated by other authorities in Britain and the United States.
Qatar Holding invested £5.3 billion in two fundraisings, which helped it avoid the government bailouts of rivals Lloyds and Royal Bank of Scotland.
It is still Barclays' biggest shareholder with a 6.3% stake and subscribed to buy more shares in the rights issue to maintain its stake, but did not buy any extra, a person familiar with the matter said.
Investors in China, Hong Kong, Japan and South Africa were not allowed to buy shares in the offer because of local laws. China Development Bank and Japan's Sumitomo Mitsui are among the bank's top 20 shareholders after investing in 2008, and it was unclear if they could participate through a nominee holder.
Advisers on the rights issue were Credit Suisse, Deutsche Bank, Bank of America Merrill Lynch, Citi and Barclays itself. – Reuters, October 4, 2013.