Barclays shares surged yesterday after Britain's third-biggest bank set out its intention to raise capital from strategic investors and surprised investors with an upbeat trading statement.
Barclays said a new equity placing and a pre-emptive offer to existing shareholders were "under active consideration". In the open-offer placing, which could come as early as this week, Barclays would agree to sell a stake to strategic investors to cover its capital needs. But it would offer a portion of the new shares to existing shareholders in a "clawback" operation.
With the sovereign funds already lined up to buy all the shares, Barclays would avoid the drawn-out process of a rights issue in volatile markets. The bank, chaired by Marcus Agius, has said consistently that it has more options for raising capital than rivals such as Royal Bank of Scotland and HBOS, whose shares have been battered in their rights issues.
An injection of £4bn would raise Barclays' equity tier one capital ratio to about 6 per cent, the minimum target set by RBS and HBOS. Analysts said that Barclays, which sees investment opportunities in current conditions, could choose to raise £5bn to give it more options.
"This fixes the problem quite neatly for them," said Mike Trippitt, a banking analyst at Oriel Securities. "They are signalling that at the moment there don't seem to be any further writedowns. If you have got sovereign wealth funds buying in with a medium-term view you might argue that it signals some visibility."
In a short trading statement that was more upbeat than recent guidance, Barclays said that pre-tax profit in May was "well ahead" of 2007's monthly run rate of £590m. Compared with May 2007 — before the credit crunch — retail and commercial banking had strong profit growth while investment banking and investment management profits were in line.
Its share price gained 3.5 per cent to 329p. Barclays, whose investment banking business is a big player in the debt markets, has taken lower writedowns on credit assets than RBS and HBOS. Investors had been sceptical about Barclays' assertions that it was riding out the credit crunch more skilfully than competitors, sending the bank's shares to a 10-year low.
Jane Coffey, the head of equities at Royal London Asset Management, said: "The jury is still out for me, but what they have said today would imply that they are increasingly confident in their position. If they raise money from sovereign wealth funds this week and then in three months announce big writedowns, the top jobs would be unsustainable."
Barclays already has two strategic investors from Asia in Temasek and China Development Bank, which bought in before the credit crunch. Temasek was recently said to be wary about making a further investment after its original stake more than halved, but if it believes Barclays' stock is close to the bottom the Singapore state fund may want to add to its holding.