Barclays profits up 15%

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The 15% improvement was in line with expectations, but included a 19% drop in profitability at Barclaycard after a greater hit on bad debt levels.

High street banking profits were up 8% to £2.45 billion, but the main driver of growth came from investment banking with a 25% rise to £1.27 billion.

Global bank HSBC is expected to lead the way for banking profits when it posts a figure of around £11.5 billion next month. The second biggest earner is forecast to be Royal Bank of Scotland, with a figure of around £8.2 billion.

Much of the growth for the banking sector has come from investments outside the UK, with domestic trading conditions seen as increasingly competitive.

Barclays said today that 40% of its profits came from outside the UK - up from 20% five years ago and leaving it on course for 50% in the next three years.

At the core UK retail business, Barclays achieved "solid" income growth of 4% but benefited most from efficiency improvements as operating expenses fell 3%.

Even though UK banking exceeded its productivity target, Barclays said the division was not yet performing as strongly as hoped and that it had identified opportunities for improvement. It has around 14 million customers at Barclays and the Woolwich mortgage business it acquired more than five years ago.

The company said income rose by 15% at Barclaycard but this was offset by the amount required to cover bad debts in the UK and the impact of higher costs at its US division following the acquisition of Juniper.

Barclays warned that the credit environment in the UK consumer sector was likely to remain challenging this year, but added that the economy should still show "reasonable" growth.

Chief executive John Varley said: "We made good progress in the UK, and are well positioned across the group for further growth in 2006."

Today's figures also include the impact of Absa for the first time after Barclays acquired a 60% stake in the South African retail lender.

Barclays described Absa's performance as "excellent" with its contribution to profits being £335 million following five months of ownership.

The move reflected the growing international reach of the group as it looks to generate 50% of its profits overseas within three years.

Mr Varley added: "The UK is a vital part of the bank and we won't achieve our goals unless the UK business is successful. But I expect the rate of growth of our international business to exceed the rate of growth of our UK businesses."