x Abu Dhabi, UAEWednesday 24 January 2018

Barclays investors back fundraising

Barclays investors have backed the British bank's controversial £7 billion pound fundraising.

LONDON // Barclays investors have backed the British bank's controversial £7 billion pound (Dh38bn) fundraising, Marcus Agius the chairman said on Monday. Addressing a shareholder meeting called to vote on the plan, Mr Agius said a count of proxy votes had indicated the capital raising would be passed. A final tally of votes would be released later, he said. Barclays shares were 9 percent higher during intraday trade, while the FTSE 100 share index was up 4.7 percent.

Barclays had been expected to get the 75 percent approval it needed for the plan to go ahead. However, there is likely to be a high number of abstentions in protest, analysts and fund managers have said. The bank's existing shareholders have been angered that they were not given first refusal on new capital, and that new investors based in Qatar and Abu Dhabi were getting more attractive terms than them.

Shareholders attending Monday's meeting in London subjected Barclays' management to hostile questioning, with several among the approximately 200 investors present calling on the board to step down. "I feel like we've all been invited to a game of Russian roulette. The only difference is all the chambers are loaded," said Trevor White, a private shareholder since 1962. Mr Agius said the group had decided against a traditional rights issue because the financial crisis had dimmed investor appetite for banking shares, casting doubt over its ability to raise capital, and potentially sapping investor and depositor confidence in the bank.

"The greater danger was not getting on with it and securing the money. It wasn't a decision we could duck or kick into the long grass, we had to deal with it quickly, which we did," he told shareholders. Mr Agius also said the lender had decided to shun the UK government's bailout of the banking sector partly because it feared the conditions attached to the rescue programme might force it to scale back its overseas growth and make loans it might not otherwise approve.

The government has said it expects the banks receiving public money to help support the flagging UK economy by keeping lending availability at 2007 levels. The government is providing up to £37 billion pounds of cash to three banks, and will in return receive stakes of up to 57 percent in RBS, and 43 percent in the combined Lloyds TSB-HBOS. The Middle East investors are set to provide about £5.3 billion pounds of Barclays' total fundraising target.

Top five investor Legal & General last week said it would vote in favour even though it does not like the structure of the controversial deal, as rejection of the deal would lead to a material deterioration in shareholder value. The Association of British Insurers, which represents a fifth of UK investors, put a rare "red top" warning on the plan, signalling "an issue of grave concern", and told investors to make their own decision on the vote.

Barclays last week tried to head off a revolt by shareholders by offering them a slice of the capital earmarked for Middle East investors, scrapping this year's executive bonuses, and saying all its board will stand for re-election next year. "We sure as hell know we're on the spot, and will stand accountable for that," Barclays' Agius told shareholders on Monday. The reserve capital instruments being taken by the investors pay 14 percent annual interest until 2019 and also carry warrants for ordinary shares.