Barclays profits up despite rise in bad debts


Barclays has reported a 37 per cent rise in half-year profits, exceeding analyst expectations despite a significant rise in bad debts.

Britain's third-largest bank said that its pre-tax profits in the first six months of 2006 rose to £3.6 billion, aided by strong performances across the group's investment banking and fund management divisions.

But profits at Barclaycard dropped by 14 per cent to £297 million, as the cost of writing off businesses' bad debts rose by 37 per cent.

Overall, Barclays suffered a 50 per cent rise in impairment charges to £1.06 billion, as customers struggled to pay off loans and credit card debts. Excluding the bad debts of Absa, the South African bank acquired by Barclays last year, bad debts across the group rose by 30 per cent.

News of Barclays' bad debts will come as no surprise to analysts, with rival banks HSBC and Lloyds TSB also reporting higher impairment charges this week.

In a statement, Barclay's chief executive John Varley said: "We expect retail credit conditions in the UK to remain challenging in the second half of 2006 as impairment trends continue to be affected by the rise in average balances and the growth in personal bankruptcies."

But he added that there were signs of stabilisation, while measures taken by the company over the past 18 months had demonstrated "a positive impact on the credit quality of new business and the management of existing exposures".

Mr Varley was also confident about the company's future prospects, adding: "There is good earnings momentum across the group and Barclays is well positioned to deliver strong earnings growth going forward."

Despite the disappointing performance of Barclays' credit card business and its rising bad debt, the bank has performed well in a number of other areas.

Barclays Capital, the company's investment banking division, has reported a 66 per cent increase in profits to £1.25 billion over the past six months, while its asset management arm Barclays Global Investors saw its profits increase by 51 per cent to £364 million.

Profits across Barclay's core UK retail banking division also rose by 12 per cent to £612 million.

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