Barclays beats profit expectations on U.S. credit card boom

By Lawrence White and Iain Withers

LONDON (Reuters) -Barclays reported better than expected first-quarter profit of 2.6 billion pounds ($3.24 billion) on Thursday after strong performance at its credit card business offset pressure on other profit engines, including investment banking.

The British bank's 16% profit jump from a year earlier beat analyst forecasts of 2.2 billion pounds in a robust set of results that underlined its increasing ties to the United States, where it has grown its investment and consumer banking businesses. Its strategy is in contrast to UK peers such as HSBC, which have pared back in the world's biggest economy.

Citigroup and American Express have also booked higher revenue from credit card spending in recent weeks but had to set aside larger sums to cover potential defaults.

Analysts at JPMorgan said Barclays' figures could lead to upgrades in forecasts for the bank's full-year profit. Barclays shares rose 4% in early trading, outperforming a 0.8% rise in the STOXX European banks index.

Income at Barclays' consumer, cards and payments division rose 47% to 1.3 billion pounds thanks to rising credit card balances driven partly by its acquisition of a portfolio from retailer Gap last year.

But there were signs higher credit card spending 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 U.S. cards business.

Barclays finance chief Anna Cross told reporters that the bad loan charge reflected higher card balances and a "normalisation" of behaviour by consumers, adding that the figure was still below levels before the COVID-19 pandemic.

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

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% to 1.8 billion pounds. Transatlantic rival Morgan Stanley this month reported a 12% 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 U.S. regulators last year for "staggering" failures in overselling $17.7 billion of structured products.

($1 = 0.8019 pounds)

(Reporting by Lawrence White and Iain WithersEditing by Sinead Cruise and David Goodman)