LONDON (Reuters) - Barclays is considering a takeover bid for a rival and could try to buy an investment bank, a newspaper said on Tuesday, amid growing speculation Britain's third-biggest bank is looking for a bargain.

Bob Diamond, the head of the Barclays Capital investment bank unit, is thought to have looked at both Lehman Brothers and UBS in the past few weeks, The Daily Telegraph said.

By 2:45 p.m. Barclays shares were down 1.6 percent at 406 percent. There was a muted reaction to the report, which analysts blamed on the lack of detail, and because the bank has long been thought the most likely UK bank to make a purchase.

"Having failed to get ABN, M&A remains the ultimate toolkit to enable it to deliver on its objective to become a top five universal bank," said Ian Gordon, analyst at Exane BNP Paribas.

"So sooner or later it may use M&A to extend itself by geography," Gordon said, but added that a deal may not be imminent, and the bank has made clear its organic growth plans for both BarCap and its global retail arm.

Barclays declined to comment. It has said it is leaving its capital and funding options open.

Recent rights issues from several UK and European banks has built pressure on Barclays to boost one of the thinnest capital cushions in the sector by raising cash, and analysts said it may want to couple any fundraising with an acquisition.

"Whilst Barclays may not have to raise capital, we see an increasing chance it may choose to do so," analysts at UBS said in a note on Tuesday, keeping a "buy" rating on the stock.

(Reporting by Steve Slater and Erica Billingham, editing by Will Waterman)