Barclays profit up, investment bank pain continues

By Steve Slater and Sudip Kar-Gupta

Barclays said on Monday capital markets had remained difficult in October as the euro zone's financial problems deepened, but had shown some improvement since last week's announcement of plans to solve the crisis.

Pretax profit in the third quarter through September reached 2.4 billion pounds ($3.9 billion). Stripping out a gain on the value of its own debt and other one-off items, profit was 1.34 billion pounds, up 5 percent on the 2010 period.

Analysts said a slackening in its investment bank had been taken up by improvement in other areas, notably UK retail banking and the BarclayCard credit card arm.

"It does look as if all their businesses are making a contribution, which is always a decent sign," said Cavendish Asset Management fund manager Paul Mumford, whose firm owns around 1 million Barclays shares.

Top-line income at Barclays Capital, the investment bank that provides the bulk of the bank's profit, fell to 2.25 billion pounds, down 22 percent from the second quarter to be in line with the consensus forecast as capital markets activity was

hit hard across the industry.

Revenue in fixed income, currencies and commodities (FICC) dropped 16 percent from the second quarter, equities income slumped 40 percent and advisory income was down by a quarter.

Barclays' investment in U.S. money manager BlackRock <BLK.N> was marked down by 1.8 billion pounds, which it said had already been recognized in equity and regulatory capital.

Barclays said its underlying profit for the first nine months of this year was a shade over 5 billion pounds, up 18 percent from a year earlier.

Losses on bad debts were 1 billion pounds in the third quarter, down 16 percent from a year ago, and have tumbled by a third so far this year.

($1 = 0.619 pound)

(Editing by Dan Lalor and David Holmes)