Barclays, Britain's third biggest bank, beat expectations with a 35% jump in 2006 profits, helped by one-off gains from disposals, and indicated it was through the worst of its bad-debt troubles.
Barclays reported record pretax profit of 7.14 billion pounds ($13.9 billion) for 2006 - including 323 million pounds of exceptional gains on disposals. That compares with 5.28 billion pounds a year earlier and an average 2006 forecast of 7.01 billion based on 18 analysts polled by Reuters Estimates.
Group income rose 25% to 21.6 billion pounds, slightly below forecasts, but outpacing a 20% rise in operating costs to 12.7 billion.
Bad-debt troubles have weighed on Barclays as UK borrowers struggle to pay back loans at its Barclaycard credit card unit and the bank said its bad-debt charge rose 37% from 2005 to 2.15 billion pounds last year.
But that was marginally better than expected and the bank said it believed it had "passed the worst" in Barclaycard UK's impairments in the second half of last year. Barclaycard's profits fell 40% to 382 million pounds.
"Arrears are down, the number of customers falling into arrears is down, but the environment is still quite difficult," outgoing finance director Naguib Kheraj told reporters.
Profits at the Barclays Capital investment-banking arm, long a driver for the group's profits, jumped 55% to 2.22 billion pounds, meeting forecasts, while Barclays Global Investors reported a 32% rise to 714 million.
But shares in the bank, trading close to a 52-week high, were off 1.1% at 773 pence against a virtually flat European banking sector.
"Barclays are guiding toward an improvement in unsecured credit performance in 2007, they now comment that they are past the worst in Barclaycard. This is clearly good news," Fox-Pitt, Kelton said in a note. But it said BarCap's results, in line with indications late last year, may have disappointed some.
"With profit up 55%, this is clearly a good result, though not good enough for the bulls."
UK retail banking profits rose 17% to 1.21 billion pounds, aided by a 7% rise in income. Barclays said it had a UK net mortgage market share of 4.5% in the second half of 2006, marking a recovery from recent years, and a negative net share of 3% a year earlier when more customers repaid mortgages than took out new ones.
"This is a business that is right back on the front foot, it has performed strongly in 2006," John Varley, Barclays chief executive, told reporters on a conference call.
He said he wanted to see the net share move nearer Barclays' traditional 6% market share.
Costs in UK banking as a ratio of income improved by 3 percentage points last year and the bank aims to improve the ratio by a further 2 percentage points this year.
Barclays' full-year dividend rose 17% to 31 pence.