Four years after the financial crisis, Barclays is finally selling more shares

Barclays, meet the inevitable.
Barclays, meet the inevitable.
Image: Reuters/Andrew Winning
We may earn a commission from links on this page.

At the height of the global financial crisis, Barclays narrowly avoided taking bailout money like many of the UK’s other largest banks. It issued new stock to the private sector multiple times in 2008, but then in January 2009 executives penned a letter promising, “we are not seeking subscription for further capital, either from the private sector or the U.K. government.” (New issues—whether to the private or public sector—dilute the value of individual shares.)

But new regulations will force Barclays to do what the financial crisis couldn’t. The Wall Street Journal reports that Barclays is likely to announce plans to raise capital by issuing billions of pounds in new securities (paywall). Although the plan is still being ironed out, the report says, the bank is probably going to either sell convertible bonds—bonds that can be converted into stock at a later date—and/or plain old common stock. Details could be announced when Barclays reports earnings on Tuesday.

Barclays has been through its fair share of trouble over the last two years. It found itself at the center of a scandal about manipulating the London Interbank Offered Rate (Libor), the world’s most important financial benchmark, and it lost many of its top executives. Yet share prices have more than doubled in the last year. It has begun the process of reviving its reputation under CEO Anthony Jenkins. And though plagued by problems of the past, it’s moving forward with a deep internal restructuring.

Then last week, the UK’s Prudential Regulation Authority told banks it’s upping the leverage ratio to 3% immediately: for every $100 in assets, banks will need $3 in common equity. Barclays currently has a leverage ratio of about 2.5%. The easiest way to do that without crippling share price is by selling existing assets. But with banks across the world deleveraging in tandem and having already sold off sizable loan portfolios, it’s possible Barclays has simply cut as much as it can.

New issues are likely to push down Barclays’s share price. Despite investor appetite for its stock recently, it seems that after four years of resistance Barclays has finally fallen victim to the inevitable.