Barclays (BARC) falls 0.9% to 270.5p after announcing a 95% take-up of its £5.8 billion rights issue. The shares start trading today, while the bank will also be looking to raise £3 million from selling the 173 million shares that were not snapped-up during the offer period. These will be taken by the underwriters of the fundraising.
The bank staged the rights issue to meet the sector’s leverage ratio target of holding 3% of its loan book in cash. The initiative was introduced earlier-than-expected by Mervyn King shortly before the end of his reign as governor of the Bank of England.
Barclays offered one share at 185p each for every four held – a 40.1% discount – in a bid to help plug its £12.8 billion shortfall following an unfavourable report by the Prudential Regulation Authority, which was established to keep banks in-line.
Investors in the US, the Middle East and Asia piled into the bank with an eye on the £6.2 billion pre-tax profit the market expects this year.
This was the largest fundraising by a UK bank since HSBC (HSBA) asked its shareholders for £12.5 billion four years ago and analysts at Investec are impressed.
Following the success of such a large rights issue Investec today upgrades the bank to 'buy' from 'add'. Its option is also swayed by a prospective 6.4% dividend in 2015 and Barclays exceeding its cost-cutting targets.