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Barclays considers new share sale | Barclays considers new share sale |
(about 1 hour later) | |
Barclays has said it is considering selling shares to new and existing investors to raise cash. | |
The announcement comes after it was reported over the weekend that the bank has been in talks with foreign investors to raise £4bn. | The announcement comes after it was reported over the weekend that the bank has been in talks with foreign investors to raise £4bn. |
It would become the latest UK bank to approach investors for extra capital as credit and economic conditions worsen. | It would become the latest UK bank to approach investors for extra capital as credit and economic conditions worsen. |
Royal Bank of Scotland has already raised £12bn through a rights issue, while HBOS is keen to raise £4bn. | Royal Bank of Scotland has already raised £12bn through a rights issue, while HBOS is keen to raise £4bn. |
Barclays shares jumped by almost 13% on the news in early trading in London. | |
Prior to the announcement, Barclays shares had been hammered amid continuing concerns about its financial position and those of its rivals. | |
'Active consideration' | |
Barclays said it was "actively considering" selling new shares "by way of a placing and pre-emptive offer to existing shareholders". | Barclays said it was "actively considering" selling new shares "by way of a placing and pre-emptive offer to existing shareholders". |
The firm said that it had already lined up buyers to take the shares at an agreed price, but it would first offer the new shares to its existing shareholders. | |
Analysts consider that the new shares will not be offered at a discount to Barclays current share price, raising questions as to how many shareholders will take up the offer. | |
The Sunday Times reported that China Development Bank and the investment arm of the Singaporean government, Temasek, were being courted to buy more shares in Barclays. | |
China Development Bank bought 3% of Barclays shares last year for about £1.5bn while Temasek acquired a 2.1% stake worth about £1bn. | |
Barclays did not comment on the details of any share sale. | |
"A further announcement will be made in the event that the board of Barclays decides to pursue such an equity issuance," Barclays said. | |
Difficult conditions | Difficult conditions |
Barclays has so far this year written off £1.7bn in assets stemming from the turmoil in the global credit markets - much less than most of its UK rivals. | Barclays has so far this year written off £1.7bn in assets stemming from the turmoil in the global credit markets - much less than most of its UK rivals. |
But analysts are worried that further write-downs are to come and say the bank's Tier One capital ratio - a key industry measure of balance sheet strength - is now one of the lowest in Europe. | |
Barclays' chief executive John Varley has suggested that targeting a high capital ratio was important amid the current credit turbulence, leaving the bank's options open to seek extra capital. | Barclays' chief executive John Varley has suggested that targeting a high capital ratio was important amid the current credit turbulence, leaving the bank's options open to seek extra capital. |
But until now, Barclays has not overtly stated that it would look to raise the extra money. | But until now, Barclays has not overtly stated that it would look to raise the extra money. |
After reporting tough trading conditions in March, Barclays said that its pre-tax profit in May was "well ahead" of the same month last year and that profits at its investment banking division met management's expectations. | |
The recent volatility in bank shares has cast doubts over the viability of some firms' efforts to ask shareholders for extra cash. | |
Watchdogs concerned about market turbulence have vowed to crack down on so-called "short selling" - where traders mark down the shares of leading companies only to buy them back later at a potentially huge profit - seen to have contributed to the instability. |