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Barclays, the UK 's third-largest bank, has reported lower-than expected losses as a result of its exposure to credit market problems.

In a statement today the company revealed that it had taken a £1.3 billion hit on credit-related securities tied to the collapse of the US sub-prime mortgage market.

Rising default levels in America 's sub-prime sector, which makes home loans available to those on low incomes or with poor credit ratings, have prompted a global credit crunch and led to fears about the extent to which the world's financial institutions are exposed to bad debts in the market.

Leading investment banks such as Citigroup, Merrill Lynch and UBS have already reported significant losses as a result of the problems in the US housing sector, but British bank Barclays today revealed the extent of its writedowns on investments in risky home loans was less than had been speculated.

Barclays reported that its investment arm, Barclays Capital, wrote down a total of £500 million for the third quarter and a further £800 million in October.

The company shrugged off the loss, stressing that the net income and pre-tax profits of Barclays Capital for the ten months to the end of October exceeded that reported for the corresponding period of the previous year.

"Today's extensive disclosure demonstrates the strength and resilience of our performance during the year and in particular during the turbulent month of October," said Barclays group chief executive John Varley.

Market speculation had led to rumours that the extent of Barclays' exposure to the sub-prime market was far higher, with the bank's share price hit as a result.

Yesterday rival bank HSBC reported sub-prime losses of $3.4 billion (£1.65 billion) in the third quarter.