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Last Updated: Tuesday, 20 February 2007, 11:09 GMT
Barclays profits hit record level
Barclays branch
Other UK banks are also tipped to have made record profits in 2006
Barclays Bank has announced a record pre-tax profit of 7.14bn in 2006 - up by 35% on the previous year.

Barclays - the first of the Big Five UK banks to report 2006 profits - said it was helped by growth in its investment banking and fund management businesses.

Bad debt was 2.15bn, up 37%, as UK borrowers struggled to pay back loans at its Barclaycard business, it said.

The credit card unit saw profit fall 40%, but the bank said it felt Barclaycard had now "passed the worst".

Exposure

Just because Barclays generates big and rising profits does not mean it is ripping us off
Robert Peston
BBC business editor

In the UK, its High Street banking division saw pre-tax profits rise 17% to 1.2bn - partly thanks to mortgages and savings accounts.

Barclays chief executive John Varley said 2006 had been an "excellent year" and that it was "well-positioned for future growth".

He said that in the second half of the year, the number of people not paying Barclaycard bills had fallen and that balances on both cards and loans also fell.

"With the exception of Barclaycard, progress has been made on all fronts," said Keith Bowman of Hargreaves Lansdown stockbrokers.

"As the first of the major UK banks to report, Barclays has set the bar high."

Criticism

The UK's top five banks are forecast to report combined profits of 38bn for the past year.

This is despite continuing fears about their exposure to bad debts.

As well as investment banking and fund management, the surge in takeover activity on global stock markets and the growth of private client banking for wealthy customers has also boosted the Big Five.

Free banking is a very good thing. I am very determined that we should protect it
John Varley
Barclays

HSBC, Royal Bank of Scotland, Lloyds TSB and Halifax Bank of Scotland have still to report their 2006 profits.

The size of the profits have attracted criticism from some groups who point to overdraft charges - which are currently being investigated by the Office of Fair Trading.

Liberal Democrats Treasury spokesman Vince Cable said the rise in profits per customer was unjustified and was being made partly through unjustifiably high fees.

However, the incoming boss of the British Bankers' Association, Angela Knight, hinted that any crackdown on fees could spell the end of free banking in the UK.

Earlier this week, the new boss of Nationwide building society, Graham Beale, said that fee-based banking appeared to be a "fairer proposition" and that compulsory monthly fees would properly reflect current account costs.

Mr Varley said that Barclays remained committed to free banking and that it was "very unlikely" it would end.

"Free banking is a very good thing. I am very determined that we should protect it," he said.

Amid criticism from consumer bodies, he also defended the bank's profits, saying they were "good for this country".

He said that institutional investors such as pension funds owned most of the bank, and that Barclays would also be paying about 2bn in tax for 2006.


VIDEO AND AUDIO NEWS
Record profits despite an increase in bad debts



SEE ALSO
UK banks 'set for bumper profits'
18 Feb 07 |  Business
Barclaycard tackles over-spenders
16 Feb 07 |  Business
Ending free bank accounts 'fair'
19 Feb 07 |  Business
Bank of America 'eyeing Barclays'
08 Dec 06 |  Business
Barclays eyes millionaires boom
04 Dec 06 |  Business
Barclays targets the super-rich
16 Oct 06 |  Business

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