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Last Updated: Tuesday, 19 February 2008, 17:40 GMT
Barclays profits slip to 7.08bn
Barclays Bank sign
Barclays said it was confident for the period ahead
Barclays has seen annual profits drop to 7.08bn, including a net loss of 1.6bn stemming from turbulence on the global credit markets.

Profits fell by 1% from 7.13bn a year earlier, but met market forecasts.

Barclays' shares have fallen 40% in the past year on uncertainty over its exposure to investments linked to the US housing market and mortgages.

However, Barclays - which announced it would increase its dividend by 10% - said it was "confident" looking ahead.

John Varley, Barclays' group chief executive, told the BBC that the company's investment arm was outperforming most of its international rivals.

He added that many of the problems in global financial markets were in danger of distracting observers from the bank's steady performance.

Shares in the firm fell 3% soon after its profits announcement, but later climbed, adding 17 pence, or 3.7%, to 477p by the close.

'Low defaults'

"Barclays delivered a resilient performance in 2007," said chief executive John Varley.

This is a business which investors believe is in some difficulties... but Barclays believes investors have got it plain wrong
Robert Peston, BBC business editor

He said the bank "handled well the stress test of market turbulence in the second half of 2007".

Profits at Barclays Capital - the British bank's investment arm - increased 5% to reach 2.34bn.

"Overall, the numbers came in broadly in line with our expectations and consensus, and that's a relief," said Mamoun Tazi, an analyst at MF Global.

"Barclays Capital performed in line despite the write-downs, which highlights the fact the underlying business is very strong."

However, the firm was not immune to the credit crunch. The bank said impairment charges and other credit provisions increased 30% to 2.79bn, including 782m linked to the US sub-prime crisis.

Barclays, like other banks, has been hit by exposure to the slowing US housing market, which has triggered a rise in mortgage defaults especially among risky - or "sub-prime" - borrowers.

And Bob Diamond, head of Barclays Capital, said "very difficult and challenging market conditions" would remain for the next six months.

Despite the fall in overall profits, the UK arm of Barclays' business saw profit rise by 4% to 2.6bn, and the retail arm did especially well with profits up 9% for the period.

Impairment charges in the UK remained "negligible", with "low levels of defaults".

Looking ahead the firm Mr Varley said he expected "significant opportunities for growth", but warned that the bank would have to be disciplined in its risk management and lending strategy.

The results come after Bradford & Bingley saw profits fall by almost half, following market turmoil. And Lloyds TSB and Alliance & Leicester are also due to report this week.

How Barclays has been hit by the credit crunch

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