Barclays profits hit record level

Barclays, the UK's third-biggest bank, has seen annual pre-tax profits climb to record levels boosted by a sharp rise in business at its investment arm.

Profits for the year to 31 December rose 20% to £4.6bn ($8.6bn). Barclays' chief John Varley said the bank had "caught the winds" of a very strong world economy. Earnings at Barclays Capital investment bank rose 25% to £1.04bn, but investment in branch operations held back growth in its UK retail business.

The group is the first of Britain's five big banks to report 2004 results. According to analysts' forecasts, HSBC, the biggest UK bank by stock market valuation, will report profits of £9.4bn later this month.

Barclays results were in line with market expectations. Its Global Investors wing made £347m, an 82% jump on 2003 figures. Profits at Barclaycard rose by 5% to £801m but were said to have been affected by a series of interest rate rises and investment to grow its customer base. The bank also blamed margins pressure on its mortgage business and spending on its branches over the past year for a 1% fall in profits in its UK retail division to £1.13bn.

"The outlook for 2005 is good as a result of balance sheet growth and investments made in 2004," Mr Varley said. Barclays cautioned that growth this year may be slower than in 2004 on the back of softer US and Chinese economies and the impact of interest rate rises on household spending in the UK. It added its bid to acquire a controlling stake in South Africa's leading retail bank Absa, was being considered by regulatory authorities. Speaking on BBC Radio 4, Mr Varley declined to be drawn on reports that Barclays had held merger talks with US bank Wells Fargo. A tie-up between Barclays and California-based Wells Fargo would create the world's fourth biggest bank, valued at $180bn. At 1405 GMT, shares in Barclays were trading down 0.67% at 590 pence. "The headline numbers are in line, but the story is costs," said analyst Alex Potter at Lehman Brothers. "They are a bit more aggressive than we had expected. The cost overshoot is not in Barclays Capital but in the UK bank."