Barclays shares rise amid rights issue rumours

17 June 2008 / by Rachael Stiles
Barclays shares rose by more than three per cent yesterday after it announced intentions to raise more than £4billion with a share issue and revealed a better than expected trading update.

The bank is hoping to place shares with new and existing shareholders, allowing both large strategic investors such as sovereign wealth funds and existing shareholders to invest on the same terms.

Investors have been sceptical about Barclays' assertion that it would weather the credit crisis more effectively than its competitors, which sent the bank's shares to a 10 year low but shares in the UK's third biggest bank have now risen 3.5 per cent to 329p, and Barclays has taken lower writedowns that other banks such as RBS and HBOS.

The bank has suggested that it has more options for raising capital than its rivals which have announced rights issues and experienced hard knocks to their share prices, while Barclays has actually experienced a rise in its shares.

Even though Barclays has been hit by writedowns as a result of the sub prime mortgage crash, it has also seen opportunity in the current economic conditions, and analysts have said that sovereign wealth funds buying shares indicates a certain level of stability, and that further writedowns seem unlikely.

In a trading statement that was more upbeat than predicted, Barclays said that its pre-tax profits in May were "well ahead of the monthly run rate for 2007", Global Retail and Commercial Banking "continued to deliver strong growth", and Investment Banking and Investment Management profits were "in line".

An announcement about what would be Britain's largest placing and pre-emptive offer of shares is expected within a month, and could see foreign investors owning almost a fifth of the bank.

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