Barclays beats profit expectations on credit card boom

Barclays reported better than expected first-quarter profit on Thursday after a strong performance from its credit card business offset pressure on other business lines.

The British bank’s pretax profit of 2.6 billion pounds ($3.25 billion) beat analyst forecasts for a repeat of the previous year’s 2.2 billion pounds.

Analysts at JPMorgan said Barclays delivered a “solid” set of results that could lead to upgrades in analyst forecasts for the bank’s full-year profit.

Income at the lender’s consumer, cards and payments division rose 47 per cent to 1.3 billion pounds thanks to rising credit card balances driven partly by its acquisition of a portfolio from retailer Gap last year.

While higher credit card spending boosted Barclays’ finances, there were signs this could have a sting in the tail. The bank’s bad loans provision for the quarter soared to 524 million pounds from 141 million a year earlier, which it blamed mainly on its US cards business.

Investment banking, a source of strength in recent quarters, was more mixed, with income from its global markets trading business sliding 8 per cent and fees from advising on corporate mergers and fundraisings down 7 per cent.

Mergers and acquisitions activity shrank to its lowest in more than a decade in the first quarter as rising interest rates and high inflation reduced appetite for dealmaking.

Fixed income, currencies and commodities (FICC) was a bright spot, with income rising 9 per cent to 1.8 billion pounds. Transatlantic rival Morgan Stanley (MS.N) this month reported a 12 per cent fall in FICC revenue.

The bank made no further charges for an earlier administrative trading error that has blighted recent results and led it to agree a $361 million penalty with US regulators last year for “staggering” failures in overselling $17.7 billion of structured products.

($1 = 0.8012 pounds)