EUROPEAN BANK shares staged a sharp recovery yesterday as Barclays of the UK and BNP Paribas of France sought to reassure shareholders, while ING revealed a package of support measures from the Dutch government.

Shares in Barclays jumped 73 per cent to 88.7p, reversing most of their losses of last week, as the chairman and chief executive of the British lender took the highly unusual step of publishing an open letter to shareholders to repeat their statement that the bank made a pre-tax profit of more than £5.3 billion (€5.6 billion) last year.

Barclays was the most high-profile victim of last week’s sell-off in British bank shares as investors worried it would be forced to turn to the government for support.

But the bank yesterday said it could absorb £17 billion in pre-tax losses before breaching minimum capital requirements set by banking regulators.

“This scale of loss absorption capability . . . gives us confidence that our capital resources are sufficient to manage Barclays safely and prudently even in these difficult markets,” Marcus Agius, the bank’s chairman, and John Varley, chief executive, wrote in the letter.

ING, the Dutch banking and insurance group that has been beset with rumours about its financial stability, revealed fresh losses and impairments on its structured credit portfolio. Michel Tilmant, chief executive since 2004, stepped down from his role with immediate effect and is to be replaced by Jan Hommen, chairman of the supervisory board and a former chief financial officer at Philips.

The new state loan guarantees are targeted at tackling investor uncertainty about ING’s €27.7billion portfolio of Alt-A mortgage-backed securities, a class of asset that sits between prime and subprime.

BNP Paribas said it would make a profit of about €3 billion for 2008, even after its investment banking division suffered a €2 billion loss for the fourth quarter.