Barclays chief executive John Varley turned on the bank's critics today, suggesting that unlike rivals it does not need a rights issue to repair its balance sheet in the wake of the credit crunch.

He also defended the banking industry, which has come under both pressure from the Government to make public its losses and level of exposure to the credit crunch, as well as passing on interest rate cuts to all customers.

Varley, who was among the bank chiefs summoned to Downing Street last week, said: "It would be bad for the world if we were to conclude that banks should stop taking risk. Managing financial risk is what banks do. Strong economies need strong banks."

At the same timeVarley did not reveal the extent of Barclays' own writedowns in its first quarter at today's annual meeting, saying that would come out as planned next month.

But he did admit: "Group profit, before tax in January and February, was in line with the monthly run-rate for 2007. We were profitable in March as well, but trading conditions were tougher, meaning that group profit for the first quarter was below that of the very strong prior-year period."

But the most cheering news for investors was Varley's comments on the bank's capital.

In the week in which Royal Bank of Scotland launched its £12 billion rights issue many analysts had suggested Barclays needs to follow suit. RBS aims to improve one of the main measures of balance sheet strength - its core tier one ratio - from 4.25% to 6% through the rights issue.

But Varley said that Barclays, which had a year-end core tier one ratio of 5.1%, "want to see our equity ratio at least at 5.25% in time".

Analysts said that, depending on the level of writedowns in the first quarter, that could mean less than £1 billion of extra capital.

Varley said: "We have been active in managing our capital base over the last months including, of course, the issuance of equity to China Development Bank and Temasek last summer. We will remain active managers both of our balance sheet and our capital ratios."

Some analysts believe that Barclays is far more likely to turn once again to sovereign wealth funds, as it did during its failed bid for ABN Amro last year, to raise fresh capital rather than launch a full-blown rights issue.

Varley said of the bid battle that he lost to Sir Fred Goodwin's RBS-led consortium: "We concluded we could not acquire ABN at a price that represented value for money for our shareholders."

He warned the banking industry's critics of the lessons learned from Japan in the 1990s. He said the Japanese banks' "sense of risk aversion overtook the financial system, and that led to a decade of economic stagnation as the banks stopped lending".

But he also praised the Government's and Bank of England's initiatives alongside those of other central banks to improve liquidity in the banking system. "They are showing their determination to help the financial system to recover," he said.