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Barclays Rights Offer to Plug Hidden Capital Hole, PIRC Says

Sept. 16 (Bloomberg) -- Barclays Plc’s sale of shares will plug a capital hole hidden by accounting rules that restrict asset writedowns, Pensions & Investment Research Consultants Ltd. said.

Barclays, the U.K.’s second-largest bank by assets, will also pay more to investors in dividends because it will no longer need to retain profit to bolster capital, PIRC said in an e-mailed statement today. The London-based lender said in July it will pay as much as 50 percent of its earnings in dividends in 2014, an increase from its 30 percent target in February.

“An amount on that scale cannot be explained by the return on investment from the capital raising itself,” London-based PIRC, which advises clients who manage more than $2 trillion in pension funds, said in the statement.

Barclays is seeking to raise 5.8 billion pounds ($9.2 billion) this month to bolster capital in the biggest rights offering by a U.K. bank since Lloyds Banking Group Plc’s 13.5 billion-pound sale in 2009. Chief Executive Officer Antony Jenkins is also shrinking assets by about 80 billion pounds and selling 2 billion pounds of loss-absorbing securities after regulators identified a 12.8 billion-pound capital hole under stricter Basel III rules.

PIRC said in April the bank’s reliance on International Financial Reporting Standards may have meant it overstated profits by 11.7 billion pounds. The accounting rules restrict provisioning against expected loan losses, it said.

A Barclays spokesman declined to comment on today’s PIRC statement.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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