Barclays up most in 16 years on share sale talk

Barclays Plc rose the most in 16 years in London trading after the bank eased concerns that a stock sale will hurt current shareholders and reported earnings last month were better than a year ago.

Barclays, the UK'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.

The bank may raise needed capital without diluting existing shareholders by letting current shareholders "claw back" new stock on the same terms offered to sovereign wealth funds, according to analysts at Keefe, Bruyette & Woods Ltd. This also minimizes the risk that some of the new stock won't be bought, said London-based analysts led by James Hutson.

"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 yesterday. Potter's "sell" rating on Barclays in under review.

Barclays gained as much as 40 pence, the most since September 1992, and traded up 7.2 percent to 340.75 pence at 10:32 am, valuing the bank at 22.4 billion pounds. The shares have fallen 32 percent this year, lagging behind the 22 percent

Credit writedowns at Barclays were less than those at peers including Royal Bank of Scotland Group Plc, which raised 12.3 billion pounds in new capital, and HBOS, the UK's biggest mortgage lender, which is seeking 4 billion pounds in a rights offering. Barclays also has less dependence on British lending and higher-quality mortgage loans than UK rivals, according to Oriel Securities Ltd.

"Their backs are not against the wall like others," said Mike Trippitt, a London-based analyst at Oriel. "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, who has an "add" rating on the stock.

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

Raising 4 billion pounds would lift the bank's capital ratios to almost 6 percent, said Potter. After completing a 4 billion-pound capital raising deal, Barclay's stock may trade between 350 pence and 400 pence, Potter estimates.

Agencies

(China Daily 06/17/2008 page17)