Barclays 'to bid for rival'

Barclays is planning to take over a rival, the Daily Telegraph reports.

According to un-named insiders, the "daring" bid comes as part of a capital-raising scheme from the bank's investment wing, headed up by Bob Diamond.

Barclays has previously been the subject of speculation in the UK media that it is considering a rights issue in order to shore up its balance sheet from credit crunch-related losses.

In a conference call with reporters last week, finance director Chris Lucas refused to rule out this possibility, saying that "all options are open" for the bank.

The takeover strategy would see a "large" sale of shares with a dual purpose - to fund a bid for a rival and to improve capital ratios, the Barclays insiders claimed.

Potential targets for Mr Diamond - who walked away from a potential takeover deal with ABN Amro prior last year due to cost - include Lehman Brothers and UBS, two of the banks worst-hit by the credit crisis.

The insiders also indicated that a "mercy killing" of a smaller UK rival such as Alliance & Leicester could be on the cards.

Barclays has yet to comment on the takeover rumors.