Barclays announces $8.85 billion share issue

The company said the cash would bolster its financial position after losses from the United States subprime crisis and allow it to capitalize on current disruptions in financial markets.

Barclays is the third big British bank to go to its shareholders to shore up its financial position. Royal Bank of Scotland recently raised $23.6 billion in Europe's biggest-ever rights issue, and HBOS PLC has announced a $7.9 billion rights issue.

Barclays, Britain's third-largest bank, said its plan would bring in new investment from Sumitomo Mitsui Banking Corp., the Qatar Investment Authority and Challenger, a company representing Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, the chairman of Qatar Holding, and his family.

The bank said 500 million pounds ($983 million) will be raised through a placing of 169 million new ordinary shares at 296 pence ($5.82), and 4 billion pounds ($7.9 billion) to be raised through an open offer of 1.4 billion shares at 282 pence ($5.55) each on the basis of 3 shares for every 14 shares now held.

Qatar Investment Authority and Challenger have agreed to invest up to 1.76 billion pounds ($3.46 billion) and 533 million pounds ($1.05 billion) respectively, Barclays said.

Sumitomo Mitsui has agreed to invest 500 million pounds ($983 million); China Development Bank up to 136 million pounds ($267 million); and Temasek Holdings, based in Singapore, up to 200 million pounds ($393 million).

"We feel that the valuation is undemanding, the dividend outlook is good news, as is the lack of any earnings guidance downgrade," said Alex Potter, analyst at Collins Stewart.

"Following this, we have a strongly capitalized bank which was the key bear point," Potter said.

Barclays shares were up 5.2 percent at 327 pence ($6.43) in early trading on the London Stock Exchange.

The bank has reported write-downs of 2.6 billion pounds ($5.1 billion) through the first quarter of this year related to the subprime lending crisis in the United States, a smaller hit than reported by some of its peers, including RBS. The company said the share issue would boost its capital and equity ratios above its long-term target, and it intends to keep them at that level "particularly while current market turbulence persists."

Current strains in the financial system have created opportunities, including pricing changes in many asset classes and reduced competition, Barclays said in a statement.

"Significant opportunities therefore exist to attract flows of new business at expanded margins consistent with Barclays' strategy to seek higher growth over time by diversifying its profits base."

The company said it intends to expand its presence in Asia, the Middle East, Africa and Europe, and step up growth in Russia, Pakistan and other new markets. It also intends to expand its investment banking activity, particularly in Asia and the United States.