Barclays refused to rule out a rights issue yesterday, but said it has plenty of other options to strengthen its balance sheet.

Finance director Chris Lucas said: "We are clear that all options remain available, we are not going to rule in or rule out anything."

He said the bank did not intend to follow the lead of several rivals by paying its dividend in shares to save cash.

"Our view on scrip dividends is they are not really a dividend, and therefore are not attractive to us," he said.

Other options to conserve cash include retaining earnings or slowing lending so the bank does not have to part with so much money.

Analysts say Barclays is also likely to try to sell stakes to outside investors as it did last summer when shares were bought by Singapore's Temasek and China Development Bank.

Alex Potter, analyst at Collins Stewart, said the low capital position was sustainable, but it could hit the share price.

"Do you bite the bullet now, recapitalise and, though you may have dilution, give yourself a better footing to generate growth? Or do you leave it as an overhang over the business?"

Speculation regarding a rights issue has grown since rivals Royal Bank of Scotland announced plans to raise £12bn and Halifax Bank of Scotland said it would ask shareholders for £4bn. On Wednesday Bradford & Bingley was widely criticised for a sudden u-turn when it announced plans to raise £300m just weeks after saying it wouldn't.

Barclays revealed a further £1.7bn of writedowns against credit market exposures and subprime mortgages in the US, but this was reduced to £1bn because of a £700m gain elsewhere in its investment banking arm. The £1bn hit was lower than many of its rivals.

Britain's third-biggest bank said that profits fell in the first quarter although it didn't say by how much. Mr Lucas said he was comfortable with an average forecast for 2008 profits of £6.4bn, down 10 per cent from 2007.

Trading in January and February was broadly in line with last year, but tougher credit markets hit the company's performance in March.

Barclays, through its Woolwich brand, grabbed over 20 per cent of net UK mortgage lending in the first quarter as it benefited from rivals retreating from a slowing housing market. Its traditional market share is around 6 per cent. The group said its disciplined approach to lending meant bad debt charges in mortgages remained low.

The bank said Barclaycard achieved very strong growth in profits, helped by improved bad debt levels in the UK, while the investment banking arm Barclays Capital remained profitable despite the difficult trading conditions.

The group's shares fell 2 per cent to close the day down 8.5p at 418.75p. Analysts blamed the drop on concerns that it had opted not to bite the bullet and raise funds now which could hold back future growth.

Barclays said its core equity Tier 1 capital ratio – a measure of how well capitalised a bank is – was slightly lower than the 5.1 per cent seen in December.

Alex Potter said: "We feel the number could be around 4.9 per cent, which will be materially lower than other UK banks. RBS is the next most weakly capitalised at 6 per cent."