Barclays and HBOS seen avoiding rights issues

LONDON (Reuters) - Barclays (BARC.L) and HBOS HBOS.L are the European banks most in need of following Royal Bank of Scotland (RBS.L) and rebuilding capital, but they might be able to avoid launching rights issues, analysts said.

Barclays and HBOS have faced intense speculation they will be forced into rights issues after RBS unveiled a 12 billion pound issue on Tuesday, the world's biggest ever.

"We currently do not expect HBOS and Barclays to undertake capital raisings as we see both of them attempting to use organic capital generation to maintain and build capital ratios," said James Chappell, analyst at Goldman Sachs.

The key issue will be the scale of writedowns the banks are forced to take on risky assets, analysts said. They face billions of pounds of losses and probable rights issues if they have to mark assets down as much as RBS, but they are expected to announce less severe hits.

In a brief trading update on Thursday, Barclays signalled it is facing a far smaller writedown than RBS, which took a 5.9 billion pound hit.

"There's a lot of people trying to project someone else's position and performance on us ... We're not going to speculate, but you have to look at our performance," said Bob Diamond, head of Barclays Capital.

Barclays, which will issue a full Q1 trading update on May 15, refused to directly say at a shareholder meeting if it planned a rights issue, but said it had options to rebuild capital -- retaining earnings, managing its balance sheet and raising new equity.

The bank is likely to seek more investment from outside, after selling stakes to China Development Bank and Singapore state investor Temasek last year, analysts said.

HBOS will also face scrutiny when it issues a trading statement alongside its annual shareholder meeting on Tuesday.