Shares crash in Barclays, other UK banks

Shares in Barclays slumped by a quarter yesterday and other UK bank stocks tumbled as worries about capital and writedowns resurfaced and the return of short-selling also hurt, dealers said.

They said there was no single reason for the fall, but talk of more writedowns following big losses by Bank of America and Citigroup added to concerns that banks might need to raise more capital.

High level talks about the crisis continue, and Bank of England Governor Mervyn King met with Prime Minister Gordon Brown, finance minister Alistair Darling and the Financial Services Authority's chairman Adair Turner said yesterday.

The Bank of England and Downing Street confirmed a meeting took place, but neither would comment on what was discussed.

Short selling also hurt the stocks late in the day after a ban on the short-selling of financial stocks expired, several dealers said.

"We know of no justification for the fall in share price," a spokesman for Barclays said. "We are fully aware of our regulatory obligations and we have not said anything."

Barclays shares closed down 25 per cent at 98 pence, its lowest level since 1993.

Royal Bank of Scotland fell 13 per cent to 34.7p and Lloyds TSB lost 4.9 per cent to end at 98.4p. HSBC was down 2.2 per cent at 535.75p.

Sterling pared gains against the dollar as shares in Barclays tumbled, with the pound falling to $1.4780 from around $1.4860. It was 0.8 per cent firmer against the dollar compared with late Thursday. The euro also gained against the British currency.

Several traders could not identify a specific reason for the late slide by Barclays or any of the stocks, but cited several rumours including worries about the impact of a UK rescue plan being discussed, executive departures, writedowns and capital.

"The shorting ban has been lifted and I guess the short guys have been sharpening up their tools and looking to see who they'll have a pop at next," said Numis Securities analyst James Hamilton.

Mr Brown met top bank officials and regulators amid widespread media and market speculation that British authorities may be about to announce further measures to boost bank lending.

There is uncertainty about the format of a new government plan being worked on to boost bank lending. It could include fresh capital injections into banks or more government guarantees on toxic assets, the Times newspaper said.

A plan could come as early as next week, a Treasury source said, and state-guarantees to get credit moving again could feature high on the agenda.