British bank Barclays Plc confirmed it had discussed selling its iShares unit, sending its stock sharply higher on Monday on hopes it will be able to avoid issuing new shares to bolster its capital.
Barclays ... confirms that it has held discussions with a number of potentially interested parties as part of its practice of regularly reviewing the group's portfolio of businesses, the bank said in a statement, adding it had not decided whether to proceed with any disposals.
Weekend press reports had said Barclays was in talks to sell iShares for up to 5 billion pounds ($7 billion).
Analysts said the proceeds of any disposal could be used to pay the costs of Barclays' participation in a government scheme to insure banks against losses on risky assets they hold, removing the need for the lender to raise cash through a sale of shares.
If they got a reasonable sum, say north of 3 billion pounds, they could probably participate in the asset protection scheme without raising more capital, said NCB Stockbrokers analyst Simon Willis.
By 0924 GMT, Barclays shares were 14.4 percent higher at 84.8 pence, while the FTSE 100 share index was up 1.4 percent.
Barclays said it was in talks with the government about joining the scheme, under which the Treasury insures banks against losses on risky debt-related assets in return for a fee.
The scheme's current members, Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and Lloyds Banking Group (LLOY.L: Quote, Profile, Research, Stock Buzz), paid the signing-on fee by issuing new shares.
Joining the asset protection program would strengthen Barclays' capital reserves, which are currently lower than those of rivals who have received government assistance or launched rights issues.
Barclays on Monday also said it had performed well so far this year.
Barclays businesses continue to perform well and have had a strong start to 2009, it said.
At the weekend, Barclays was confirmed as one of the main recipients of insurance paid out by U.S. insurer AIG (AIG.N: Quote, Profile, Research, Stock Buzz). Disclosures made by AIG on Sunday showed Barclays received $8.5 billion in payments.
iShares, part of Barclays asset management division, is a leading provider of exchange traded funds, popular investment vehicles which allow investors to bet on the direction of share price indices.
(Additional reporting by Steve Slater; editing by Simon Jessop)