Barclays set for bumper equity issue

London: 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 ($7.8 billion, Dh29.2 billion) from sovereign wealth funds in a deal that could be completed in the next two weeks.

By 0935 GMT Barclays shares were up seven per cent to 340-1/4 pence after hitting 358 pence, to be the biggest FTSE 100 gainer. The shares fell to a 10-year low of 293 pence last week on concern its balance sheet was too stretched and growth was slowing.

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 writedowns 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.

It is expected to structure a deal that will bring in cash from sovereign wealth funds and other investors but not dilute existing shareholders. That could see it give shareholders the chance to buy the same percentage of shares in the placing on the same terms offered to new investors, but it will be underwritten by the sovereign funds.

The shares could be 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.