Barclays has reported a 37% rise in half-yearly profits to £3.6bn but rising provisions for bad debts have knocked its credit card business.
Barclays says credit conditions in the UK remain challenging
Profits at Barclaycard dropped 14% to £297m as overall charges relating to the writing-off of debts rose by 30%.
Barclays said it expected credit conditions to remain "challenging" in the UK as debt levels increased and the number of personal bankruptcies rose.
HSBC and Lloyds TSB have both recently reported a rise in bad debt provisions.
In the six months to the end of June, Barclays' total revenues rose 38% to £10.9bn ($20.4bn).
The firm said it had seen healthy growth in its retail banking operations in both the UK and in its international operations.
But the bank as a whole suffered a 50% rise in impairment charges to more than £1bn as more UK customers were unable to pay off loans and credit card debts.
Figures have shown a huge rise in personal insolvencies so far this year as rising personal debt levels have begun to take their toll.
"We expect retail 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," said chief executive John Varley.
But Barclays said steps it had taken over the past 18 months to reduce its exposure to bad debts had had a "positive impact" on its business.
Barclays shares closed 8.5 pence, or 1.4%, lower at 619p.
"On the surface, these are good figures," said Keith Bowman, analyst at Hargreaves Lansdown stockbrokers, while adding that he had concerns about the bank's underlying performance.
"There maybe some relief from investors that defaults at Barclaycard are not higher than expected, but with management providing an uninspiring performance re: cost growth, takeover rumours could well resurface".