Barclays to take £3 billion in writedowns

Barclays will likely take £3 billion more in writedowns in the first half of this year, as well as raise £3 billion in equity and pay an interim scrip dividend, said Dresdner Kleinwort, which downgraded the stock to "reduce" from "hold."

"Given the current environment and the group's growth aspirations, we expect management to boost capital ratios," the brokerage said.

On a "do nothing" basis, the brokerage expects Britain's third largest bank's equity Tier 1 ratio to fall to 4.7 per cent in the first half of this year.

"If the company does not raise capital then we think that the perception will be that it has written down only what it can afford rather than what is necessary," the brokerage said, adding that it expects an equity injection rather than a rights issue.

Barclays, which will issue a full first-quarter trading update on May 15, is facing speculation that it could launch a rights issue to rebuild its capital and also scrutiny from investors over its exposure to losses from the credit crunch.

The bank had refused to directly say at a shareholder meeting last month if it planned a rights issue, but said it had options to rebuild capital - retaining earnings, managing its balance sheet and raising new equity.

Last month, Britian's biggest mortgage lender HBOS made a £4 billion cash call and said it would cut its dividend, just days after its rival Royal Bank of Scotland offered investors a deeply discounted rights issue.

Mr Dresdner noted that five European banks had already announced rights issues and expects that there will be more.

"We identify Barclays, Fortis and Deutsche Postbank as the most likely candidates," Mr Dresdner said.

The brokerage does not expect Barclays to cut dividend.