Barclays 'to raise Dh28bn from SWFs'

Barclays said it plans to sell billions of pounds worth of shares to new and existing shareholders, sending its shares soaring yesterday as investors celebrated the move to boost its stretched balance sheet.

Britain's third biggest bank said it was considering issuing new equity, but declined to comment on the amount it hoped to raise.

A weekend newspaper report said it would raise £4 billion (Dh28bn) from sovereign wealth funds in a deal that could be completed in the next two weeks.

Keefe, Bruyette & Woods analyst James Hutson said the placement and pre-emptive rights issue outlined by Barclays "would go a good way towards drawing a line under the market's current capital concerns".

Barclays said in a brief statement that its profit in May was "well ahead" of the monthly run rate of 2007, which was £590 million, providing reassurance that any more write-downs it has taken have been modest.

There has been persistent speculation that Barclays is seeking to raise billions of pounds from outside investors to shore up its capital position.

The shares could be placed at a premium, or a discount of up to 10 per cent. The mechanism should allow it to sidestep UK pre-emption rights guidelines that make it hard to sell a stake of over five per cent to an outside investor. Barclays has one of the thinnest capital cushions in Europe and has so far not followed rivals in raising funds.

Royal Bank of Scotland and HBOS are repairing capital with big rights issues.

It has taken a more modest hit from credit crunch losses than other banks but its capital adequacy ratio – with a core Tier 1 capital ratio of 5.1 per cent at the end of 2007 – is now one of the lowest.

The bank wants to raise its core tier 1 capital ratio above 5.25 per cent.

Each billion pounds raised would lift the ratio by about 0.25 percentage points, so its ratio would rise to near six per cent if it confirms a £4 bn fundraising and write-downs have been relatively modest.

Barclays has lost just over $5bn from assets tarnished by the US sub-prime housing crisis and credit crunch, less than a third of the hits taken by RBS and UBS.