Wanted: Bank investors. Will pay to avoid govt

By Steve Slater - Analysis

LONDON (Reuters) - Almost unlimited taxpayer funds are on offer to U.S. and European banks to keep them afloat but many banks are keen to avoid that cash and will pay up to stay in private hands.

Barclays and Commerzbank highlighted the choice facing banks on Friday as the British bank raised about $12 billion (7.3 billion pounds) from investors in Abu Dhabi, Qatar and elsewhere while the German bank mulled taking state funds, according to sources.

Shares in both were hit. Commerzbank shed 6 percent on heightened worries about its capital cushion, while Barclays fell 13 percent on concern it is paying more than rivals to get its cash.

It marks the double-edged sword faced by even those banks capable of attracting investors -- which isn't all of them.

"Government intervention is being avoided albeit at a very high cost, in our view, with an eye on resuming dividend flow more quickly than the peer group," said Alex Potter, analyst at Collins Stewart, in regard to Barclays.

Pressure is on banks to rebuild capital after billions of dollars lost on structured credit assets and to build up bigger capital cushions in the face of impending global recession.

Most European regulators demanding higher capital ratios are leaving banks free to find the cash how they want -- as long as they do so quickly and find lots of it.

For Switzerland's top two banks forced to find funds this month, UBS took $5.3 billion in state cash but had to hand over a 10 percent stake while Credit Suisse said it would raise over $8 billion from investors.