Barclays reported a 17 % decline in its half year adjusted generated income to £3.591 billion as it was badly hit by the soaring cost of group-wide reorganisation following the Libor rate-rigging scandal. Moreover, the bank also reported that its capital hole was much bigger than previously thought at £12.8 billion and announced a £5.8 billion issue of capital-raising rights. The share price was down at approximately 5.7 % at the time of the report.
In the past six months, Barclays was able to adjust its income but still fell short by three per cent to £15,071 billion as its income growth were offset across the majority of business group wide funding deposit growth. Its investment banking unit saw a rather stable income of £6.473 billion driven increase in prime services and equities of which investment banking was offset by a decline in fixed currency, income and commodity income respectively.
In addition, the bank mentioned that it had previously set aside a £1.3 billion payment protection insurance against selling claims and an additional £650 million for provisions related to rate swaps interests. It was estimated to be in the range of £42 billion worth of funding for Lending Capital was loaned to UK households and businesses in the first two quarters of the year.
Barclays in one of its earlier reports revealed that its capital hole was larger than what was earlier anticipated (£12.8 billion to be exact), which basically means that Barclays will have to seriously work hard to reach the 3 % leverage ratio it needs to hit its mid -year target by 2014 with its current ratio of 2.2 %.
In order to cover Barclays shortfall, it will be issuing new shares worth £5.8 billion by way of new ordinary shares which are priced at 185 p: a 40.1 per cent discount for every four ordinary shares on hand. It will also be issuing £2 billion worth of bonds that can be turned into shares or can be easily obliterated if the banks should venture too close for comfort. All the rest will be produced from planned balance sheet positioning and retained earnings generations retained.