Barclays may face £7.5bn shortfall

by Gill Montia

Story link: Barclays may face £7.5bn shortfall

Barclays may need to raise a further £7.5 billon to restore it balance sheet.

According to RBS analyst, Ian Smillie, the bank’s fundraising efforts during the summer did not produce sufficient cash to offset potential losses from credit-related writedowns.

Barclays began the process of raising £4.5 billion in June in a move that involved Qatar Investment Authority and Sumitomo Mitsui Banking Corporation each taking a stake in the bank.

The bank said the new funds would be used to improve its capital position and expand its overseas retail banking operations.

However, the RBS analyst is warning of a large and growing equity shortfall within Barclays and his comment follow predictions from Citigroup that Barclays could face writedowns of £7.5 billion against its £28.1 billion of debt exposure.

A further cash call could prove acutely embarrassing to Barclays and question the future of its chief executive, John Varley.

The fundraising this summer took the form of an “open” rather than a “rights” issue to avoid the problems encountered with volatile share prices.

However, existing shareholders had the opportunity to increase their stake in the group but the response was less than warm, with a take-up of 19%.