June 16 (Bloomberg) -- Barclays Plc jumped in London trading after the bank eased concerns that selling more stock will hurt current shareholders and said earnings last month were better than a year earlier.

Barclays, the U.K.'s fourth-biggest bank by market value, gained as much as 13 percent after saying in a statement that existing investors may be able to participate in a share sale to select investors. Pretax profit last month was ``well ahead'' of a year ago, the London-based bank said.

Chief Executive Officer John Varley may need as little as 4 billion pounds ($7.9 billion) to restore capital and may let existing shareholders ``claw back'' stock on terms offered to sovereign wealth funds such as China Development Bank and Temasek Holdings Pte, analysts at Keefe, Bruyette & Woods said today. That sum would be a third as much as Royal Bank of Scotland Group Plc, Britain's second-biggest bank, added to reserves.

``Their backs are not against the wall like others,'' said Mike Trippitt, a London-based analyst at Oriel who has a ``buy'' rating on Barclays stock. ``Looking at the dividend, asset growth and getting in a sovereign wealth fund are all cards they can play before they consider a rights offer,'' said Trippitt.

Barclays rose 3.5 percent to 329 pence, valuing the bank at 21.6 billion pounds. The shares have dropped 35 percent this year, underperforming the 23 percent decline of the eight-member FTSE 350 Banks Index.

`Less Dilutionary'

Barclays could bring its core equity Tier 1 capital, a measure of financial strength, to about 6 percent without selling more than 4 billion pounds of new stock, analysts at Keefe Bruyette, Deutsche Bank AG and Collins Stewart analysts estimated.

``This is clearly less dilutionary than a rights issue and also solves the capital-shortfall perception,'' said Alex Potter, a London-based analyst at Collins Stewart in a note to clients today. Potter's ``sell'' rating on Barclays is under review.

Banks worldwide have raised almost $310 billion to help cover losses of $392 billion since the collapse of the U.S. mortgage market roiled credit markets.

Credit writedowns at Barclays were less than those at RBS, which raised 12.3 billion pounds ($23.4 billion) in new capital and wrote down 5.9 billion pounds this year. HBOS, which is seeking 4 billion pounds in a rights offering, marked down 2.8 billion pounds.

Barclays plans to raise 4 billion pounds within two weeks through a share sale to sovereign wealth funds, the Sunday Times reported yesterday, without saying where it got the information. The bank is in talks with at least six potential investors, including China Development Bank and Temasek Holdings and a deal would include offering new stock to current shareholders underwritten by overseas investors, the newspaper said.

Unsuccessful Bid

A share sale to sovereign funds may add to Singapore-based Temasek's stake of 2.06 percent and China Development Bank's 3.02 percent. Barclays sold the stakes to help support its unsuccessful bid for ABN Amro Holding NV last year.

``A further announcement will be made in the event that the board of Barclays decides to pursue such an equity issuance,'' Barclays said today.

Temasek declined to comment on whether it is in talks to buy new stock in Barclays. ``We do not comment on market rumors,'' said Temasek, which manages more than $100 billion of assets, it said in an e-mailed statement.

A 4 billion-pound share sale would lift Barclays's core equity capital to 6.3 percent from about 5 percent, estimated Deutsche Bank analyst Jason Napier in a note to clients today. Keefe, Bruyette & Woods estimates the ratio would increase to 5.8 percent. RBS and HBOS both say their rights offers take their capital ratios above 6 percent.

`Significant Positive'

Barclays's capital plan is a ``significant positive,'' Napier said. ``Having the issue underwritten by strategic investors eliminates the overhang associated with investment bank- underwritten issues.''

U.K. banks face slower growth amid higher funding costs and rising defaults as house prices fall at the fastest rate since the recession of the 1990s. Barclays said its investment-bank and global lending are offsetting U.K. declines.

``Barclays group profit before tax in May was well ahead of the monthly run rate for 2007,'' the bank said today. The bank's global consumer and commercial banking posted ``strong'' profit growth last month, while profit growth at the Barclays Capital securities and asset management units were ``in line,'' it said.

``Given the choppiness of capital markets and the strong trading environment for first-half 2007, reporting investment banking and investment management profits flat year on year in May 2008 is an extremely strong result,'' Napier said.

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

Last Updated: June 16, 2008 12:37 EDT