Barclays revealed this morning that it is to raise £4.5 billion through a discounted share placing and open offer in which the Qatar Investment Authority and Sumitomo Mitsui Banking Corporation will become major new shareholders.

The issue of 1.6 billion new shares, almost a quarter of the bank's existing shares, will also see the chairman of Qatar Holding, Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, and his family become significant new investors in the UK's third biggest bank.

Barclays is undertaking the UK's largest placing and open offer of shares in a bid to shore up its capital base which has been damaged by the fall-out from the US sub-prime market crisis. The bank has written down £1.7 billion in the first quarter, in relation to credit-crunch losses, on top of £1.6 billion last year.

Shares in Barclays were the highest climber in the FTSE 100 in opening trades, up just over 5 per cent to 327.5p. Other banking shares also climbed as investors expressed relief that Barclays had secured new investors.

The bank also insisted that it would continue to pay its dividends in cash, unlike other financial institutions who have resorted to scrip dividends in the wake of capital raising.

John Varley, group chief executive of the bank, said: "Through our capital raising today we strengthen our capital base and give ourselves additional resources to pursue our strategy of growth through earnings diversification."

"We are pleased to structure our share issue in such a way as to welcome Qatar Investment Authority, the chairman of Qatar Holding and Sumitomo Mitsui Banking Corporation as significant new shareholders in Barclays and also to give existing shareholders the ability to participate," Mr Varley said.

Half of the money raised will be used to restore the bank's capital base, while the balance will be put to pursuing new business opportunities. "Around the world our competitors are stepping back from various markets and this offers a great opportunity to put our capital to work," the chief executive said.

The bank said it wanted to accelerate growth in new markets such as Russia and Pakistan, in retail and commercial banking. It also intends to continue its growth in investment banking and investment management, including wealth management.

Some £4 billion will be raised through a placing and open offer of 1.407 billion new shares at 282p each, a 9.3 per cent discount to Tuesday’s closing price, on the basis of three new shares for every 14 held. The balance of £500 million will be raised through a placing to Sumitomo MitsuiBanking, Japan's third biggest bank, of 169 million new shares at 296p, a 4.7 per cent discount.

China Development Bank, which already owns 3 per cent of Barclays, will invest £136 million in the placing and open offer and its stake in the bank will remain the same. Temasek, the Singapore investment vehicle, which currently owns 2 per cent of Barclays will see an increase in the size of its stake after agreeing to invest up to £200 million.

The Qatar Investment Authority and Challenger, the company representing the chairman of Qatar Holding, have agreed to invest up to £1.764 billion and £533 million respectively, Barclays said. The participation of other institutional investors will be revealed in the prospectus, published later today.

Barclays said that the issue will enable it to run capital ratios ahead of its long-standing targets of 7.25% tier one and 5.25% equity tier one.

Taking into account the proceeds of the share Issue, Barclays expects to have a tier one ratio of 8.8% and an equity tier one ratio of 6.3% as at 31 December 2007. Tier one capital ratios are a closely watched measure of financial strength and Barclays has been under fire from analysts for letting its deteriorate.

Barclays added also that, as previously announced, group profit before tax in May was well ahead of the monthly run rate for 2007.

Bob Diamond, the president of Barclays and head of Barclays Capital, its investment bank, moved to quash speculation that the fund raising was an attempt to avoid further sub-prime related write-downs. He said the bank was comfortable with its leveraged fund exposure, despite market speculation that the bank has been less conservative in its leveraged finance write-downs than other banks.

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