Barclays considering rights issue

Barclays also said its pretax profit in May was "well ahead" of the same period a year ago due to strong profit growth in its global consumer and commercial banking division.

Analysts have speculated for weeks that Britain's third biggest bank would follow Royal Bank of Scotland Group PLC and HBOS PLC, which announced rights issues because of exposure to the U.S. subprime crisis.

In a rights issue, companies sell new shares to existing shareholders, who can also sell the rights to buy those shares.

Barclays said the sale of new shares "by way of a placing and pre-emptive offer to existing shareholders ... is under active consideration" but gave no indication of how much money it might seek to raise.

The bank's statement followed a report in the Sunday Times that Barclays planned to raise 4 billion pounds ($7.8 billion) within two weeks through a share sale to sovereign wealth funds.

The newspaper said talks with at least six potential investors, including China Development Bank and Temasek Holdings, and that a deal would include offering new stock to current shareholders underwritten by overseas investors. It did not cite sources.

In this scenario, the bank would line up buyers to take the shares at an agreed price before then offering the new shares to all its existing shareholders to have first right of refusal.

Analysts believe the new shares would not be offered at a discount to the existing share price to avoid diluting the value of its shares. That may be unattractive to some shareholders but it will still have the advantage of being underwritten by big financial institutions.

"This is clearly less dilutionary than a rights issue and also solves the capital shortfall perception and gives the company greater room to absorb further write-downs," said Collins Stewart analyst Alex Potter.