Barclays to buy back up to US$17.6b of notes sold in error

BARCLAYS will start to buy back as much as US$17.6 billion of securities after it accidentally sold more structured and exchange-traded notes than it had registered for sale.

The bank said the repurchase period will start on Aug 1 and will expire on Sep 12, according to a statement on Monday (Jul 25). Barclays separately said it plans to resume the issuance and sales of some iPath exchange-traded notes, which had been suspended in April.

In March, the bank said it had issued billions more securities than it had registered with the Securities and Exchange Commission. The error requires the firm to repurchase affected securities at their original price under a so-called rescission offer.

Barclays said in Monday's statement that the securities in question consist of about US$14.8 billion of structured notes and around US$2.8 billion of exchange-traded notes. It will also pay interest on the structured notes.

The paperwork blunder has been called "basic", "bizarre" and "embarrassing" by analysts. Major banks typically apply for blanket registrations that allow them to regularly issue notes that give clients a chance to bet on everything from market volatility to the performance of particular shares.

Barclays said at its first-quarter results that it has taken charges of £540 million (S$902.5 million) relating to the matter. The lender is due to publish its second-quarter earnings on Jul 28 and some analysts expect to see further costs from the repurchase process.

"Relative to consensus we are more cautious on revenues and on costs," Citigroup analysts said in a note. "This may reflect the treatment of rescission losses."

Barclays said in May that the provision was sensitive to equity market movements and a 5 per cent reduction in the S&P 500 index would lead to roughly £300 million more in the pre-hedged provision. However, this movement would be expected to be "substantially offset by the hedging arrangements," the bank said. BLOOMBERG