Barclays To Raise £7 Billion.

[Sancho Panza]

Telegraph 29/7/13

'The bank has been in talks with investors to launch a £4bn rights issue as part of a fundraising programme aimed at filling a capital hole thought to be as large as £7bn.

The capital raising is expected to be announced when Barclays reports its first-half financial results on Tuesday, with City analysts forecasting a pre-tax profit of £3.7bn, down about £600m on the same period in 2012.

Payment protection insurance provisions are expected to rise by as much as £800m and Barclays is also expected to make a further large provision against interest rate swap mis-selling claims.

Barclays has so far set aside £2.6bn against PPI claims and £850m for interest rate swap mis-selling redress.

The bank is expected to say its own PPI mis-selling provisions have increased by about £300m to around £7bn, the largest amount of money set aside by any lender. '

It certainly seems a novel approach to raise money before the crisis.One wonders why they don't just retain some of their not inconsiderable earnings?

[Bloo Loo]

Another bank, another weekend, another hole to fill..

All unseen on the balance sheet of course.

[interestrateripoff]

Panicking first?

Got to pay the talent the fat fees they so richly deserve.

[thecrashingisles]

Do they have pneumonia, or just a touch of Qatar?

[easy2012]

It certainly seems a novel approach to raise money before the crisis.One wonders why they don't just retain some of their not inconsiderable earnings?

Not at all. It is the questionable PRA who ordered them to do so (and so with CoOp).

BARC is retaining the earnings, but that is not enough to meet the arbitrary target in 2-3 years.

A few years back the government (that is FSA and BoE) were happy with a 4.5% capital ratio. And all of the sudden the new PRA wants 9% and gives banks 2 - 3 years to comply. At the same time, St Vince goes round beating up banks for reducing their balance sheet (/lending) and some banks were tricked into expanding the balance sheet / lending and now got caught up with this.

It does however surprise me that Banks appear to fail to lobby effectively this time round for some reason.

[rantnrave]

I'd be happy to loan them my savings fund for an interest rate above 3%. Apparently they're not interested though.

[Fully Detached]

This must put some pressure on Nationwide now, surely? They were tagged at the same time as Barclays as needing to raise capital, but I expected them to argue their way out of it. If Barclays have decided to do as they're told, I don't see how Nationwide can avoid it.

[Venger]

This must put some pressure on Nationwide now, surely? They were tagged at the same time as Barclays as needing to raise capital, but I expected them to argue their way out of it. If Barclays have decided to do as they're told, I don't see how Nationwide can avoid it.

So many businesses and bank-type institutions seeking raising money, including soon to be Co-Op bank as I understand it.

£6bn-£8bnish is still a lot of money. Does investor money never run out? Or sentiment for such investments decline? Thinking about RBS's circa £12bn fund-raising which soon had a lot of unhappy investors in the wake.

Such fund raising, when it's successful, must remove money from somewhere else, obviously. Having some sort of contracting side-effect elsewhere, even if it's in lack of demand to borrow. (Re RBS 3rd July 2013: The bank's net lending fell by £1.6 billion in the first quarter of 2013, despite tapping the State's Funding for Lending Scheme for £750 million worth of cheap finance.)

If the bank had not raised any capital it would have needed to reduce its balance sheet by £427m, which it concluded would had a damaging impact on its businesses and had a "negative impact" on its ability to lend to small businesses. Jenkins had warned last month that meeting the leverage ratio could forced the bank to reduce lending.

http://www.theguardian.com/business/2013/jul/30/barclays-cash-call-6bn-capital-gap

[The Masked Tulip]

I was asked into Nationwide last week as they wanted to tell me about their new savings rates - wanted to offer me 1.6% IR on savings.

Just saying.

[Bloo Loo]

So many businesses and bank-type institutions seeking raising money, including soon to be Co-Op bank as I understand it.

£6bn-£8bnish is still a lot of money. Does investor money never run out? Or sentiment for such investments decline? Thinking about RBS's circa £12bn fund-raising which soon had a lot of unhappy investors in the wake.

Such fund raising, when it's successful, must remove money from somewhere else, obviously. Having some sort of contracting side-effect elsewhere, even if it's in lack of demand to borrow. (Re RBS 3rd July 2013: The bank's net lending fell by £1.6 billion in the first quarter of 2013, despite tapping the State's Funding for Lending Scheme for £750 million worth of cheap finance.)

http://www.theguardi...6bn-capital-gap

money is not removed...Money is moved....

[winkie]

Correct me if wrong.....but isn't this something similar to what happened to another well known large bank just before it was majority nationalised?.....Déjà vu.

[winkie]

I was asked into Nationwide last week as they wanted to tell me about their new savings rates - wanted to offer me 1.6% IR on savings.

Just saying.

Nationwide saving rates are a joke......their older mortgage holders get some of the best rates though....don't think they need savers money.

[Venger]

money is not removed...Money is moved....

Even that though, can hurt whoever it's currently held with, and moved from. Such as other banks holding the billions in deposit, propping up their own capital ratios. Or cashed out of other investments, to invest in Barclays rights-issue.

What did it used to be? Every £1 removed from a bank, is £10-£50 less they can lend out? Although FLS has replaced that function, it must still have some relevance.

Money can also be destroyed, or some would say value is, when money invested in a rights-issue not being worth as much at a later point, if the share-price falls, and investors cash out at the lower price.

[Bloo Loo]

Even that though, can hurt whoever it's currently held with, and moved from. Such as other banks holding the billions in deposit, propping up their own capital ratios. Or cashed out of other investments, to invest in Barclays rights-issue.

What did it used to be? Every £1 removed from a bank, is £10-£50 less they can lend out? Although FLS has replaced that function, it must still have some relevance.

Money can also be destroyed, or some would say value is, when money invested in a rights-issue not being worth as much at a later point, if the share-price falls, and investors cash out at the lower price.

Money is merely a means of exchange...barclays needs capital...thats not necessarily cash...once they have sold the shares, they will have cash, but i bet you that is moved into another asset same day. Maybe they cold be buying some Gilts?

As for the originators losses?...there arent any in the transaction...shares IN, cash OUT.

Edited July 30, 2013 by Bloo Loo

[Sour Mash]

Even that though, can hurt whoever it's currently held with, and moved from. Such as other banks holding the billions in deposit, propping up their own capital ratios. Or cashed out of other investments, to invest in Barclays rights-issue.

What did it used to be? Every £1 removed from a bank, is £10-£50 less they can lend out? Although FLS has replaced that function, it must still have some relevance.

Money can also be destroyed, or some would say value is, when money invested in a rights-issue not being worth as much at a later point, if the share-price falls, and investors cash out at the lower price.

Removing your money from the bank just means putting it in another one generally, so no real effect on the system as a whole.

You could transfer your credit balance to cash and just sit on it, I suppose. If enough people started demanding money instead of holding bank credit then it would certainly cause issues. Not likely that this will happen though as it would require widespread and coordinated action from a public that generally doesn't know its **** from its elbow, let alone anything about banking.

What would really hurt the banking systems' ability to lend is banks having to take their bad debts onto their balance sheet and write them down through asset sales. Which of course is why that won't be allowed to happen at any cost.

[Venger]

Removing your money from the bank just means putting it in another one generally, so no real effect on the system as a whole.

We can agree it can have an affect on an individual bank.

It's why there was a lot of focus, and concern, after Co-operative Bank after the downgrade to junk, the size of the hole, and some relief that withdrawals were limited to something like £500m from a capital base of £37bn. The deposit guarantee surely helping to prevent panic.

I'm not championing 'going to cash' to limit a banks ability to lend.

Yes marking up assets and debts properly would be a good thing from a HPCers view.

Although there is a tightening with this Basel thing, and partly why Co-op have been caught out, and why Barclays themselves need to improve their capital position. The authorities seem to want capital strengthening, but done without banks cutting back on lending, or shrinking their balance sheets.

My suggestion is all these capital calls from the different institutions, even if all successfully go through, are going to affect lending, or demand for borrowing, regardless. Although I can't pinpoint how exactly.

This follows an anouncement by the Prudential Regulation Authority that Nationwide was among seven lenders who in total need to boost their balance sheets with £27 billion of fresh capital. The PRA gave the Nationwide, Barclays, Co-op, HSBC, RBS, Santander and Standard Chartered unitl the end of this month to find the money. Although the PRA said Nationwide only need to raise £400 million to meet its target, there is speculation among analysts that a tightening of financial regulations will require the building society to raise up to £2 billion.

http://citywire.co.uk/money/nationwide-looks-to-new-bonds-to-plug-capital-shortfall/a687421

[Venger]

Citywire from an hour ago, suggests there are some moves to shrink the balance sheet. I wonder how they are going to do that, what they'll be selling, and who will be buying it.

Barclays has rushed to fill a £12.8 billion hole in its reserves identified by regulators with plans to sell new shares and bonds to investors while shedding up to £80 billion of loans from its inflated balance sheet.

http://www.citywire.co.uk/money/barclays-must-raise-13bn-offers-dividend-sweetener/a694751?ref=citywire-money-latest-news-list

[ticket2ride]

Citywire from an hour ago, suggests there are some moves to shrink the balance sheet. I wonder how they are going to do that, what they'll be selling, and who will be buying it.

http://www.citywire....atest-news-list

Selling: Junk debt? Buying: Lloyds, Virgin, RBS?