Profits dip at Barclays' investment arm

The BarCap arm, which accounts for around 80 per cent of the company's profits, saw top-line income drop 14 per cent in the third quarter, while profits stripping out accounting volatility fell 22 per cent on the second quarter to 765m.

Across the group, a sharp reduction in bad debts meant third quarter pre-tax profits edged ahead 8 per cent on the previous three-month period to 1.27bn. The figure was down 28 per cent on the same quarter a year earlier.

John Varley, who will step down as chief executive in March after 14 years with Barclays, said: "Our income and profit performance was resilient for the first nine months of 2010 despite a subdued economic environment and moderate volumes."

The slower performance at BarCap mirrors updates last week from Royal Bank of Scotland and HSBC as the sector faces up to weaker market activity.

In the UK retail banking division, profits were up by 20 per cent to 734m across the nine months to September 30. This reflected a 100m gain on last year's acquisition of Standard Life Bank and a year-on-year improvement in bad debts as economic conditions continued to improve.

Mr Varley added: "We understand what is required of us to support private sector-led economic activity and have lent some 35 billion to UK households and businesses in 2010, an increase of over 30% versus the same period in 2009."