June 9 (Bloomberg) -- Barclays Plc, the U.K.'s fourth-biggest bank by market value, may sell shares to replenish capital depleted by asset writedowns, two people with knowledge of the matter said.

The fund-raising would bolster the London-based company's so- called Tier 1 capital ratio, which trails Edinburgh-based HBOS Plc and Royal Bank of Scotland Group Plc. Barclays needs at least 7 billion pounds ($13.8 billion) to strengthen its balance sheet as asset markdowns increase, according to estimates from analysts at Lehman Brothers Holdings Inc. and Citigroup Inc.

``Many people are surprised they haven't pushed the button by now,'' said Robert Talbut, chief investment officer at Royal London Asset Management, which own Barclays stock.

Chief Executive Officer John Varley said as recently as May 12 that the company may have to raise capital. Barclays shares have declined 27 percent since then, twice as much as the eight- member FTSE All-Share Banks Index.

Robin Tozer, a Barclays spokesman, declined to comment.

Barclays fell as much as 4.7 percent and traded down 10.75 pence to 327 pence at 1:15 p.m. today in London, valuing the bank at about 21.4 billion pounds. The eight-member FTSE 350 Banks Index fell 1.3 percent after New York-based Lehman Brothers said today it plans to raise $6 billion in capital after posting a record $2.8 billion second-quarter loss.

Lehman IPO

Securities firms and banks have sought almost $285 billion from outside investors as asset writedowns and investment losses caused by the collapse of the subprime mortgage market climbed to $390 billion during the past year, according to data compiled by Bloomberg.

Barclays is in talks with sovereign wealth funds to gain more than 3 billion pounds of funding, the London-based Sunday Telegraph reported yesterday. The company sold shares to Singapore's Temasek Holdings Pte and Beijing-based China Development Bank last year to help finance the acquisition of Amsterdam-based ABN Amro Holding NV. Temasek holds 2.06 percent and China Development owns 3.02 percent of Barclays, Bloomberg data show.

Barclays's core equity Tier 1 ratio, a measure of capital strength, will be almost 5.1 percent at the end of June, the company said last month. That's less than its target of 5.25 percent and less than Edinburgh-based HBOS Plc and Royal Bank of Scotland Group Plc, which say their ratios will be at least 6 percent by year end.

`Prudent Course'

``It is clear to me that getting to our equity ratio target and then running ahead of it is a prudent course of action in these times,'' Varley said in the May 12 speech. ``Would I rule out raising capital? No more than we would rule out mergers and acquisition activity.''

Barclays wants to expand its securities unit in the U.S. as New York-based rivals sell stakes amid record losses and writedowns, President Robert Diamond said in February. Barclays Capital, the bank's securities unit, has written down 1.7 billion pounds in credit-related assets this year, less than HBOS, the U.K.'s biggest mortgage lender.

Credit markets and credit-related trading is improving, Barclays Capital head Jerry del Missier said in an interview last week. While the unit is focused on growing through hiring and investment, it won't rule out acquisitions, del Missier said.

``We are already seeing things getting better,'' he said. ``The underlying flow of business remains very strong.'' Del Missier declined to comment on whether Barclays might try to buy or invest in Lehman, the fourth-biggest U.S. securities firm.

Barclays last year withdrew from an agreement to acquire Amsterdam-based ABN Amro. It was instead purchased by RBS, Fortis and Banco Santander SA for about 73 billion euros ($115 billion).

RBS, Britain's second-largest bank, said today in a statement that it sold 11.6 billion pounds of stock to investors in Europe's biggest right offering. HBOS is raising 4 billion pounds in a similar share sale.

To contact the reporter on this story: Ben Livesey in London blivesey@bloomberg.net

Last Updated: June 9, 2008 08:43 EDT