BARCLAYS was last night in the uncomfortable position of being unable to say whether it would follow Royal Bank of Scotland in launching a rights issue to bolster its capital position.
Senior executives at Britain's third-largest bank came under sustained pressure to reveal their intentions yesterday but stonewalled the calls for clarity.
Asked by a shareholder at the bank's annual general meeting if there would be a rights is
sue, Barclays chairman Marcus Agius said only that raising new capital was "an option".
Agius said the bank was seeking to improve its capital position over time, but its relatively better performance compared with some rivals gave directors more options. These included retaining profits, managing the balance sheet and asking investors for a cash injection.
Agius said: "Because of the relative strength of our performance we have options and we will take those options."
His answer failed to satisfy shareholders and was greeted by shouts of "Yes or no?".
Agius's response contrasts with stance taken by RBS chairman Sir Tom McKillop at the Edinburgh-based bank's AGM on Wednesday. McKillop and RBS chief executive Sir Fred Goodwin were criticised by their shareholders but were able to argue they had acted decisively in opting for a £12 billion rights issue.
About 800 people attended the Barclays AGM in London yesterday amid speculation the bank would want to raise between £6bn and £7bn if it were to follow the RBS example.
Barclays shares were down slightly yesterday after the company revealed that its profits in the first quarter fell from a year earlier as its investment bank and fund management arms were hit by tough financial market conditions. In comments released before the meeting, the bank said profits at Barclays Capital and Barclays Global Investors were "well below" the strong profits of a year earlier.
Barclays chief executive John Varley said he was targeting a Tier 1 equity ratio of 5.25 percent "in time", from 5.1 per cent at the end of 2007.
In his AGM statement, Varley said the second half of 2007 was "as hard a six-month period as I can remember", adding that conditions in some markets in 2008 were "remaining difficult".
Barclays wrote down the value of its risky assets by £1.6bn last year, but capital markets deteriorated sharply again in March.
That market deterioration prompted RBS to slash the value of its investments in below-prime "Alt-A" mortgages and collateralised debt obligations in particular.
"Taking similar marks to RBS would generate £6-7bn pounds of write-downs at Barclays," said Alex Potter, analyst at Collins Stewart.
But Broker Dresdner Kleinwort said Barclays may try to raise funds from other sources instead of existing shareholders.
Analyst James Invine said: "We don't think that Barclays will have a rights issue but it may well seek capital from other investors."
The full article contains 481 words and appears in The Scotsman newspaper.
