Barclays expected to launch rights issue

May 3 2008 by Tony McDonough, Liverpool Daily Post

BANKING giant Barclays will follow Royal Bank of Scotland and Halifax Bank of Scotland and announce a rights issue to raise billions in fresh capital, a leading stockbroker said last night.

Dresdner Kleinwort downgraded the group’s stock to “reduce” from “hold” and said it expects the group to have to raise around £3bn via its shareholders.

Using Royal Bank of Scotland’s markdowns, the brokerage also estimates that Barclays will take another £9bn of writedowns beyond the £2.3bn it took in 2007.

The group employs more than 1,000 people in Merseyside in Wavertree Technology Park and Kirkby, as well in its network of branches.

Earlier this week, Barclays was forced to quash rumours that its Kirkby Barclaycard operation would move to Prescot.

Dresdner said: “Given the current environment and the group’s growth aspirations, we expect management to boost capital ratios.”

“If the company does not raise capital then we think that the perception will be that it has written down only what it can afford rather than what is necessary.”

Barclays, which will issue a full first-quarter trading update on May 15, is facing speculation that it could launch a rights issue to rebuild its capital and also scrutiny from investors over its exposure to losses from the credit crunch.

The bank had refused to directly say at a shareholder meeting last month if it planned a rights issue, but said it had options to rebuild capital – retaining earnings, managing its balance sheet and raising new equity.

Paul Idzik, group chief operating officer of Barclays, will leave the group later this year.

Mr Idzik was reportedly one of chief executive John Varley’s key lieutenants with a brief to overhaul the bank’s culture and management.

He said: “I have enjoyed myself enormously at Barclays over the last nine years and believe that we have made tremendous progress in transforming the organisation.”

Mr Idzik became COO in 2004 after joining Barclays Capital in 1999.

tonymcdonough