Barclays Slides on Rights Issue and Restructuring Costs

Plant Money

Barclays (NYSE:BCS) was the first of three major British banks to report half-year earnings this week, and there was a lot of buzz around the company ahead of its report on Tuesday morning. Shares listed on the New York Stock Exchange edged lower Monday morning on speculation that the company would announce a rights issue to plug a multibillion-dollar capital gap, and on Tuesday morning, shares plummeted in pre-market trading on confirmation of the rumors. Shares were off as much as 7 percent ahead of the opening bell in New York.

On June 20, Britain’s Prudential Regulation Authority announced a tougher leverage ratio target of 3 percent for major financial institutions in the United Kingdom. As of June 30, Barclays’s ratio was just 2.2 percent, representing a shortfall of 12.8 billion pounds ($19.58 billion).

“After careful consideration of the options to meet the PRA request for a 3% leverage ratio by June 2014, the Board has decided on a set of actions, including the rights issue, to meet this target, whilst continuing to deliver our strategy under the Transform programme,” Chairman Sir David Walker said in a statement released alongside the midyear report. “The PRA has agreed and welcomes our plan.”