PREVIEW-Capital crux as Barclays, HSBC, A&L face writedowns

By Steve Slater

LONDON, May 8 (Reuters) - Britain's HSBC (HSBA.L: Quote, Profile, Research), Barclays and Alliance & Leicester are set to join the ranks of banks showing big first-quarter writedowns next week.

Europe's biggest bank HSBC could take another multi-billion dollar hit on soured U.S. home loans as it winds down its mortgage book, yet it has a comfortable capital cushion to cope.

The positions of Barclays (BARC.L: Quote, Profile, Research) and A&L (ALLL.L: Quote, Profile, Research) are more precarious, prompting speculation they could seek extra funds from shareholders to rebuild capital or cut dividends. Barclays, which reports results on May 15, appears keen to attract an outside investor or two to shore up its capital position. Big rights issues planned by Royal Bank of Scotland (RBS.L: Quote, Profile, Research) and HBOS (HBOS.L: Quote, Profile, Research) will leave Barclays with one of the thinnest capital cushions in Europe.

"A relatively weakly capitalised outlier is not a position that sits well with Barclays' ambitions in terms of developing Barclays Capital into the U.S. and Asia and building out the international retail and commercial bank globally," John-Paul Crutchley, analyst at Merrill Lynch, said in a note on Thursday.

He estimated the bank needed 5 billion pounds ($9.8 billion), which could be raised through a rights issue or from an outside investor, or a combination of both. China Development Bank and Singapore state investor Temasek invested 2.4 billion pounds last summer and similar deals could be seen, analysts said.

Barclays said it has options other than a rights issue to boost its balance sheet. Although its Q1 profits dropped from a year ago, the group and its Barclays Capital investment bank arm still made a profit, it said in a brief update last month.

That indicated any Q1 writedown on risky assets is likely to have been less than the 1.6 billion pound hit it reported in 2007, analysts said.

Most rivals have taken a far bigger writedown for Q1 than for 2007, stoking talk Barclays hasn't marked its assets down enough, even if they are of a better quality than rivals'. It also benefits from the positive revaluation of debt it carries.