Association of British Insurers raises flag over Barclays coco bonds ahead of AGM

ONE of the UK’s most influential investment bodies has raised flags over Barclays’ controversial coco bonds, saying the money-raising method dilutes shareholder value.

City A.M. understands that the Association of British Insurers (ABI), has issued its members with an “amber-top” warning over the convertible bonds, which transfer into Barclays equity if the bank gets into trouble.

The warning is not as severe as the ABI’s “red-top” warning, nor is it a recommendation that shareholders should oppose the use of cocos, but it is more stern than the “blue-light” approval the insurers’ body can give.

The warning effectively flags up that shareholders should think twice before passing proposals at Barclays’ upcoming annual meeting that would allow the bank to issue new shares.

The topic of cocos is set to be just one of the hotly debated issues at Barclays’ 25 April meeting, which will be hosted by new chairman Sir David Walker.

The ABI, whose members cover almost a fifth of the FTSE All-Share index, declined to comment yesterday.

Meanwhile, the bank restated its earnings under new accounting rules, revealing higher profits for 2012 than it had previously reported. Under the new format the bank’s pre tax profits come in at £7.6bn in 2012, not the £7bn previously stated.

Impairment charges fell £256m to £3.3bn, while total income rose £318m to £29.4bn.

Much of the improvement came in restating the performance of the markets division. Pension provisions are also tweaked in the new rules.

The improvement pushes adjusted return on average shareholders’ equity up to nine per cent, from 7.8 per cent.