Barclays Shares Plunge on £5.8bn Cash Call and Mis-Selling Compensation

Barclays' stock price plunged on the market open as the bank revealed it is launching a £5.8bn rights issue to plug a capital shortfall while the amount it has set aside for the mis-selling of a range of financial products has risen.

The bank's shares plummeted by over 6% to reach 290.30p as of 0810 BST after Barclays revealed that it will be offering billions of pounds worth of shares, to existing shareholders, at a 40% discount.

As part of its plan to appease regulatory requirements, Barclays' shares will be offered at a discount price of at 185p, compared with yesterday's closing price of 309.05p.

Meanwhile, Barclays revealed that it was hit by a £1.35bn (€5.6bn, $2.1bn) payment protection insurance (PPI) charge and has added £650m to its compensation pot for the mis-selling of complex interest rate hedging products.

While the bank's pre-tax profit for the first half of 2013 was almost double its profit from a year ago, it missed analyst expectations.

Barclays' half-year adjusted profit dropped 17%, reaching £3.59bn excluding the PPI charge, which is below analysts' forecasts of £3.7bn.

"In February, we outlined our Transform plan to become the 'Go-To' bank. As part of Transform, we set out a number of financial commitments, including in relation to capital, to be achieved by the end of 2015," said Antony Jenkins, CEO at Barclays.

"As a consequence of the Prudential Regulation Authority (PRA) review we have had to modify our capital plans, in order to meet the 3% PRA Leverage Ratio target by June 2014.

"Our first half results demonstrate the strength of our business. We saw good momentum in our performance and - five months on - the execution of our Transform plan is progressing well."