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Barclays considers new share sale Barclays considers new share sale
(about 1 hour later)
Barclays has said it is considering selling shares to existing investors to raise cash. Barclays has said it is considering selling shares to new and existing investors to raise cash.
The announcement comes after it was reported over the weekend that the bank has been in talks with foreign investors to raise £4bn.The announcement comes after it was reported over the weekend that the bank has been in talks with foreign investors to raise £4bn.
It would become the latest UK bank to approach investors for extra capital as credit and economic conditions worsen.It would become the latest UK bank to approach investors for extra capital as credit and economic conditions worsen.
Royal Bank of Scotland has already raised £12bn through a rights issue, while HBOS is keen to raise £4bn.Royal Bank of Scotland has already raised £12bn through a rights issue, while HBOS is keen to raise £4bn.
Barclays shares jumped as much as 8% on the news in early trading in London. Barclays shares jumped by almost 13% on the news in early trading in London.
Prior to the announcement, Barclays shares had been hammered amid continuing concerns about its financial position and those of its rivals.
'Active consideration'
Barclays said it was "actively considering" selling new shares "by way of a placing and pre-emptive offer to existing shareholders".Barclays said it was "actively considering" selling new shares "by way of a placing and pre-emptive offer to existing shareholders".
"A further announcement will be made in the event that the board of Barclays decides to pursue such an equity issuance," the firm added. The firm said that it had already lined up buyers to take the shares at an agreed price, but it would first offer the new shares to its existing shareholders.
Barclays also said that its pre-tax profit in May was "well ahead" of the level it was at in the same month last year and that profits at its investment banking division met management's expectations. Analysts consider that the new shares will not be offered at a discount to Barclays current share price, raising questions as to how many shareholders will take up the offer.
The Sunday Times reported that China Development Bank and the investment arm of the Singaporean government, Temasek, were being courted to buy more shares in Barclays.
China Development Bank bought 3% of Barclays shares last year for about £1.5bn while Temasek acquired a 2.1% stake worth about £1bn.
Barclays did not comment on the details of any share sale.
"A further announcement will be made in the event that the board of Barclays decides to pursue such an equity issuance," Barclays said.
Difficult conditionsDifficult conditions
Barclays has so far this year written off £1.7bn in assets stemming from the turmoil in the global credit markets - much less than most of its UK rivals.Barclays has so far this year written off £1.7bn in assets stemming from the turmoil in the global credit markets - much less than most of its UK rivals.
But analysts say its capital ratio - a measure of balance sheet strength - is now one of the smallest in Europe. But analysts are worried that further write-downs are to come and say the bank's Tier One capital ratio - a key industry measure of balance sheet strength - is now one of the lowest in Europe.
Barclays' chief executive John Varley has suggested that targeting a high capital ratio was important amid the current credit turbulence, leaving the bank's options open to seek extra capital.Barclays' chief executive John Varley has suggested that targeting a high capital ratio was important amid the current credit turbulence, leaving the bank's options open to seek extra capital.
But until now, Barclays has not overtly stated that it would look to raise the extra money.But until now, Barclays has not overtly stated that it would look to raise the extra money.
Barclays shares have fallen 13% this month as traders have hammered leading banks amid continuing concerns about their financial positions. After reporting tough trading conditions in March, Barclays said that its pre-tax profit in May was "well ahead" of the same month last year and that profits at its investment banking division met management's expectations.
But watchdogs concerned about volatility in bank shares have vowed to crack down on so-called "short selling" where traders mark down the shares of leading companies only to buy them back later at a potentially huge profit. The recent volatility in bank shares has cast doubts over the viability of some firms' efforts to ask shareholders for extra cash.
Watchdogs concerned about market turbulence have vowed to crack down on so-called "short selling" - where traders mark down the shares of leading companies only to buy them back later at a potentially huge profit - seen to have contributed to the instability.