BARCLAYS is poised to launch a £5 billion rights issue tomorrow, with some in the City suggesting the lender should seek £8bn in fresh funding to plug a hole in its balance sheet.
The bank will post its half-year results and said it will update the market on reports over the weekend that it is planning a big fundraising.
The Prudential Regulation Authority (PRA) has ordered Barclays to raise £1.7bn to shore up its finances and has imposed a new rule, called the leverage ratio, demanding big banks must hold capital worth 3 per cent of their loans.
But Mike Trippitt, an analyst at Numis Securities, thinks Barclays needs to raise up to £12bn and should opt for an £8bn rights issue.
Trippitt questioned “how deep the market really is” for bonds. Sandy Chen, an analyst at Cenkos Securities, thinks a £4bn rights issue would be “quite digestible” for investors.
“From a macro-prudential regulatory perspective, a £4bn rights issue would seem a simple, achievable thing for Barclays to do,” Chen said. “With Barclays shares having doubled in the past year, and trading at levels last seen in 2010 or early 2011, it would be hard to argue against doing it sooner rather than later.
At a 20 per cent discount, it would be a one-for-eight rights – quite digestible.”
Investec Securities analyst Ian Gordon argued that Barclays “doesn’t need” a rights issue and instead called for an “18-month dividend suspension”.
He added: “Barclays will capitulate to regulatory demands by raising fresh equity, which – in our view – it doesn’t need. How very disappointing. If Barclays has the courage to say no, we would see further upside, but sadly, this appears less likely.”