INTERNATIONAL. British bank Barclays is raising £7.3 billion (US$12.1 billion) from investors from Qatar, Abu Dhabi and elsewhere to allow it to avoid taking UK government rescue cash, it said on Friday.

The fundraising is being made through a range of complex capital instruments, which could see Middle East investors owning about one-third of the bank.

An issue of reserve capital instruments (RCIs) will pay annual interest of 14% until June 2019. Warrants representing billions more pounds could also be issued.

Britain's second biggest bank is raising up to £3.5 billion from Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi's royal family. That could give him a 16.3 percent stake in the bank.

Barclays shares initially jumped after the news as investors welcomed the bank's ability to raise cash in tough markets and an adequate trading update, but later eased back. At 0930 GMT they were unchanged at 205-1/4 pence after touching 228p.

The bank said group profit in the first nine months of this year was "slightly ahead" of the same level a year earlier.

It took a net writedown of £129 million from credit market writedowns for the third quarter, but said £1 billion of gains on debt it carries were reversed in October.

Barclays is raising up to £2 billion from Qatar Holding and £300 million from Challenger, an investment vehicle of a member of Qatar's royal family. That could leave Qatar Holding a 12.7% stake and Challenger with 2.8%.

Barclays' investor base has been transformed in the past two years, as it has raised funds from investors in China, Singapore and Japan as well as the Middle East and the bank expects to benefit commercially from the links as well as getting cash.

"There has been a significant shift in the availability of capital and economic power in the world over the last five years and we're ensuring we're aligned with those changes," said John Varley, Barclays chief executive.

The bank is seeking to raise up to a further £1.5 billion pounds from the sale of MCNs (mandatorily convertible notes) with existing and other investors.

Asked on a conference call whether Barclays has enough capital to avoid more fundraising, Varley said: "Yes, we have what we need."

Barclays earlier this month turned down an offer of government funds under Britain's £400 billion bailout package and said it would raise capital privately.

Meanwhile Barclays said Friday that group profit before tax for the nine months ended 30 September 2008 was slightly ahead of 2007. The company posted strong income growth, and costs rose broadly in line with the rate of income growth. Impairment charges grew at a similar rate to the first half of the year.

Third quarter 2008 results included a preliminary estimate of the net benefits arising on the acquisition of Lehman Brothers North American investment banking and capital markets businesses and net losses from credit market writedowns of £129 million, comprising writedowns of £1.2 billion offset by £1.1 billion gains on the fair valuation of issued notes.

John Varley, Group Chief Executive of Barclays, said, " The strength of our profit performance reflects the conservative stance of our major UK asset portfolios and continued distribution-led growth in retail and commercial banking outside the UK; and in Barclays Capital strong flows of client business and good progress on the integration of the acquired Lehman Brothers businesses."

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