Barclays was at the centre of renewed concerns about the British banking sector yesterday on another bloody day for banking shares. The UK bank closed down nearly 6 per cent to end the day at 537.5p on renewed fears that it had sought emergency funding from the Bank of England. The central bank denied that that any borrower had tapped its standby funding.

A show of confidence by Frits Seegers, the chief executive of Barclays’ global retail and commercial business, who spent £700,000 acquiring 127,000 shares, was not enough to halt the slide at Britain’s third-largest bank.

The FTSE 100 closed down 55.5 points at 6,530.6 – its second day in the red after a 135.5point fall on Thursday. The banks shaved 37 points off the index, with Royal Bank of Scotland (RBS) closing down 4.7 per cent, Lloyds TSB down 2.5 per cent, HBOS down 2.2 per cent and HSBC down 2 per cent.

Analysts laid into the sector yesterday with a series of downgrades. Sandy Chen, of Panmure Gordon, the stockbroker, said: “There is a clear path that leads from the current turmoil in credit markets to major trading losses for the UK banks with US mortgage and global markets exposure.”

Mr Chen pointed out that HSBC, Barclays and RBS were directly exposed to the downturn in the American housing market. “And if UK house price falls begin to gain momentum, the patterns seen in the US could be replicated in the UK,” he said. He has already cut his profit forecasts and price targets for every UK bank that he covers.

Analysts at Goldman Sachs, the investment bank, gave warning yesterday that UK banks “face a significant number of structural and regulatory issues” and predicted that consensus expectations of Lloyds TSB’s profitability would have to be reduced.

The analysts added to Barclays’ woes by forecasting that second-half profits at Barclays Capital would be £583 million, a 40 per cent fall on the previous year and 65 per cent down on the first half. “We believe question markets still remain about 2008 revenue levels,” Goldman Sachs said.

Barclays declined to comment, but sources noted that Mr Seegers would not have been permitted to carry out his share purchase, nor could the bank have continued its share buyback programme, if a profit warning had been imminent. This month Barclays made an unscheduled trading update, in which Bob Diamond, the president of the bank and head of BarCap, said that he expected “profitable trading for the rest of 2007”. Barclays has been dogged by rumour since August, when it twice accessed the Bank of England’s overnight credit facility. The bank was also hit over its involvement with SIV-lites – a type of higher-risk structured investment vehicle that invests in mortgage-backed assets.

Northern Rock closed flat yesterday at 171.3p a share, despite an interview with Bryan Sanderson, the new chairman, in which he revealed that the troubled mortgage lender could borrow as much as £25 billion in emergency funding from the Bank of England by February.

Mr Sanderson told The Journal in Newcastle that he could not guarantee jobs at the bank if a sale proceeded as expected.

The bank has sent out a formal memorandum containing due diligence information to suitors, with a deadline for proposals expected in a few weeks.

The chairman said: “We don’t know what any potential buyer will do with the bank. It could be they run it as it is and there are minimal changes, but, on the other hand, that’s not the most likely outcome”.

Banks’ FTSE falls

Barclays down 34p to 537.5p
Royal Bank of Scotland down 23p to 475.5p
Alliance & Leicester down 21.5p to 730.5p
Lloyds TSB down 13.5p to 517.5p
HBOS down 19p to 825p
HSBC down 19p to 906p

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