Barclays triggered a sharp rally in bank shares yesterday as the beleaguered lender insisted it would not have to raise fresh capital despite taking hefty writedowns in its investment banking arm.

Shares in Barclays surged 73%to 88.7p – reversing most of their losses of last week – after Marcus Agius, its chairman, and John Varley, chief executive, took the unusual step of publishing an open letter to confirm that the bank made profits of more than £5.3bn last year and did not need to raise fresh capital.

The move sparked a recovery in bank shares, which collapsed last week amid concerns that some of the UK’s largest lenders would be forced to turn to the government for fresh capital injections that would lead to their effective nationalisation. Shares in Lloyds Banking Group jumped 32% to 65.2p, while RBS shares rose by almost a fifth to close at 14.5p.

Financial Times