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Barclays has revealed that its investment banking unit lost £1 billion ($1.94 billion) in the first quarter of 2008 due to credit-market turbulence, but the British bank surprised some analysts by not announcing a rights issue as some of its peers have.

Barclays has surprisingly not yet offered a rights issue to regain its lost investment capital.

The Barclays Capital investment banking unit was nonetheless profitable during the quarter despite the losses, Barclays said.

It also warned that first-quarter profits would be lower. Barclays shares fell 2.2 percent in early trading on the London Stock Exchange to 418 pence ($8.12).

In April, Barclays said, profits of retail and commercial banking and other operations -- excluding Barclays Capital -- were ahead of April 2007.

Barclays Capital remained profitable for the year, it added.

The bank did not announce a rights issue to raise more capital through issuance of new shares, as Royal Bank of Scotland and HBOS have done, to shore up its finances.

That leaves Barclays with the weakest capital position among Britain's major banks, said Alex Potter, analyst at Collins Stewart.

"In fairness, Barclays deserves credit for not being forced into a rights issue but we feel the capital tension will remain a drag on the stock price," Potter said.

Chris Lucas, Barclays' finance director, said the company was keeping its options open.

"We are not going to rule in or rule out anything at this stage," he said.

Richard Hunter, analyst at Hargreaves Lansdown Stockbrokers, said Barclays' statement "does little to assuage any concerns regarding the likelihood of a rights issue, with the company insisting on keeping the door ajar."

"With this uncertainty prevailing and a generally cautious view pervading the UK banking sector at present, the general market view still tends towards a hold for Barclays," Hunter said.

source: london.com