executive of Barclays, Antony P. Jenkins is still wrestling with the
bank's past wrongdoings.
Mr. Jenkins, 52, took another step on Tuesday to rebuild Barclays'
tarnished reputation when he announced that the bank planned to raise
up to £7.8 billion, or $12 billion, in new capital.
In doing so, Barclays bowed to pressure from British regulators, who
this year called for it to improve its so-called leverage ratio, a
measure of how much borrowed money a bank uses, after the figure was
deemed to be too low.
Barclays, the only major British institution regulators cited, had
objected to the tougher targets. Its announcement on Tuesday, analysts
said, was a sign that British authorities were now willing to require
the country's largest financial institutions to abide by stricter
regulation.
"The regulator has had a big say on how Barclays is raising its
capital," said Chirantan Barua, a banking analyst at Sanford C.
Bernstein in London. "Why would any C.E.O. want to dilute his
company's stock if he didn't have to?"
The regulatory demands are the latest of several run-ins between
Barclays and local authorities in the last two years and follow recent
scandals that have engulfed the bank.
Barclays reached a $450 million settlement with American and British
authorities in June 2012 over the manipulation of benchmark interest
rates, and has set aside billions of dollars for charges related to
inappropriate sales of insurance and other complex financial products
to consumers.
"We did get things wrong," Mr. Jenkins told reporters on Tuesday. "We
were too aggressive and too short-term. It's going to be a five- to
10-year journey to change the culture at Barclays."
And the bank may face more legal woes.
Barclays said on Tuesday that it was contesting undisclosed
preliminary findings from an investigation into the legality of
payments to Qatari investors as part of a rescue fund-raising deal for
the bank in the 2008 financial crisis.
The Middle Eastern sovereign wealth fund Qatar Holding invested a
combined £5.3 billion in Barclays in two stages in 2008, and the
British investigation has focused on the role in the agreements of
four current and former senior employees, including the bank's finance
director, Christopher G. Lucas.
The Justice Department and Securities and Exchange Commission also are
investigating the activity, which might have violated the Foreign
Corrupt Practices Act. Barclays said it was cooperating with the
authorities.
"It's hard to say when all the regulatory problems for Barclays will
be over," Mr. Barua said. "I don't think you can call it an end for at
least two or three more years." Barclays also said on Tuesday that it
had set aside an additional £2 billion in the second quarter related
to what regulators have determined to be inappropriate sales of
insurance and complex financial hedging products to some of its
clients.
Barclays has now made provisions of almost £3 billion since the
beginning of 2012 to cover legal costs related to the sale of products
ruled out of bounds by regulators.
The legal costs weighed on Barclays' second-quarter results, as the
bank reported a £168 million loss, compared with a £746 million profit
in the second quarter of 2012. Barclays' second-quarter revenue fell
less than 1 percent, to £7.3 billion.
As part of the capital plans announced on Tuesday, Barclays said it
would raise £5.8 billion through a rights issue of stock that would
allow current investors to buy one share for every four shares they
own at a 40.1 percent discount to the bank's closing share price on
Monday.
The bank also plans to issue as much as to £2 billion of so-called
contingent capital, financial instruments that convert to equity if a
bank's capital falls below a certain threshold. Barclays also said it
would reduce assets on its balance sheet by as much as £80 billion and
use part of its profits to improve its leverage ratio to 3 percent by
June 2014.
Shares of Barclays tumbled 5.7 percent Tuesday in trading in London,
where the bank is based. Over the last three trading sessions, the
stock has fallen nearly 10 percent in anticipation of a capital
increase.
While Mr. Jenkins acknowledged that raising the capital might dilute
investors' stake in Barclays, he added that the plan would help
reassure shareholders about the bank's financial strength.
"It's about doing the right thing for the long term," he
said.Barclays, Credit Suisse, Deutsche Bank, Bank of America Merrill
Lynch and Citigroup are coordinating the planned £5.8 billion capital
offering by Barclays.
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