Barclays has said it is planning to raise £4.5bn ($8.8bn) in a share issue to bolster its balance sheet.
The firm is to sell shares to new investors, such as the Qatar Investment Authority, and existing shareholders including China Development Bank. Barclays said the fundraising move would "strengthen its capital base". It is the latest British bank, following the Royal Bank of Scotland and HBOS, to seek to raise money to ease the impact of the credit crunch. Barclays shares rose more than 5% in early trading in reaction to the share move.
The Qatar Investment Authority, the state-owned investment arm of the Gulf state, will invest £1.7bn in Barclays, making it a substantial new shareholder. A separate Qatari company called Challenger - controlled by Sheikh Hamad Bin Jassim Bin Jabr al-Thani - is to invest £533m in the business. Japanese bank Sumitomo Mitsui Corporation, meanwhile, has agreed to buy £500m in new shares. The share issue will see existing investors, including China Development Bank and Singaporean investment firm Temasek, top up their holdings. The former will buy £136m worth of shares, while the latter will acquire £200m. Barclays has suffered losses from mortgage-backed investments, devalued by the slump in the US housing market, but not on the same scale as many top US and European firms. It recently gave an upbeat trading report, saying profits in May were well ahead of 2007. "Through our capital raising, we strengthen our capital base and give ourselves additional resources to pursue our strategy of growth through earnings diversification," chief executive John Varley said.
"We draw strength from the continued resilience of our trading performance."
Under the terms of the share issue, all existing investors will have the opportunity to buy additional shares in the business. The bulk of the new shares, worth £4bn, are being sold for 282 pence, representing a 9% discount on their value at close of trading on Tuesday. British banks are tapping their shareholders for extra cash to shore up their financial position as credit markets remain unstable and earnings from key activities - particularly mortgage lending and investment banking - come under real strain. RBS Group has already raised about £12bn while HBOS is looking to raise £4bn. Barclays led the way in courting foreign investors when it sold a sizeable stake in its business to China Development Bank last year.
The Qatari Investment Authority already has significant interests in the UK, in effect controlling about 25% of shares in supermarket chain Sainsbury's.