Banking giant Barclays is to tap shareholders for £5.8 billion after revealing a mammoth £12.8 billion hole in its finances.
The cash call is part of a "bold but balanced plan" to meet City regulator demands to shore up its finances by June next year. It insisted the move would make the bank stronger and would not impact on its aims to boost lending to households and businesses.
But the group's shares slumped 8% - following a 4% drop on Monday - as the scale of the fundraising took the City by surprise and as Barclays revealed a higher-than-expected bill for yet more mis-selling provisions.
It set aside another £2 billion charge to cover compensation for mis-selling, including £1.35 billion for payment protection insurance and £650 million for controversial interest rate swaps. Excluding mis-selling provisions, underlying pre-tax profits fell 17% to £3.6 billion over the first six months of 2013 as the bank counted the cost of a group-wide restructure launched in the wake of its Libor rate-rigging settlement last year.
Barclays chief executive Antony Jenkins said the bank saw "good momentum" in the first half, but admitted its fundraising plans will put back some of the financial targets under its overhaul, dubbed Project Transform.
The group is to issue new shares at a discounted price to investors to meet the City regulator's requirements to strengthen its leverage ratio - a key measure of financial strength - to 3% from 2.2%. This comes on top of billions of pounds already being raised by the bank to build up a cushion against future financial shocks as part of a wider capital raising across the industry.
The bank will also issue £2 billion of bonds that are turned into shares or wiped out if the bank gets into trouble. In addition, the balance sheet would be shrunk by between £65 billion and £80 billion, while earnings would be retained to make up the balance of the capital gap.
Mr Jenkins said: "I am certain the decisive and prompt action we are taking will leave Barclays stronger."
The Prudential Regulation Authority (PRA) said it had "agreed and welcomed" the bank's plans to bolster its reserves.
The scandal-hit bank also revealed it had received the Financial Conduct Authority's preliminary findings of a probe involving four past and present employees including outgoing finance chief Chris Lucas over fees paid under a 2008 fundraising from Qatari investors. Barclays said it had contested the findings last week and expected further developments soon.