Barclays profit falls after takes hit on own debt

British bank Barclays posted a 9% fall in first-quarter profit, missing forecasts, after it took a hit on the value of its own debt and income at its key investment banking arm dipped.

New chief executive Bob Diamond is planning to sell assets, reshape the bank and slash costs to boost profitability. The bank said on Wednesday it was on track to achieve 500 million pounds (USD 823 million) of cost savings this year.

Barclays reported a pretax profit of 1.66 billion pounds for the January-March period, just below forecasts. Adjusted profit, stripping out movement in its own credit, was 2 billion pounds, up 10% on the year.

Shares in the group, whose underlying return on equity improved to 10.1% in the first quarter, had fallen by 3.3% to 292 pence by 0704 GMT.

Its Barclays Capital investment bank arm contributed underlying profit of 1.3 billion pounds, down 15% on a year ago, as top-line income came in at 3.3 billion pounds, down from 3.8 billion a year ago and just below expectations.

Income from its fixed income business fell 22% from a bumper first quarter a year ago, offsetting an 11% rise in equities and 10% rise in advisory income.

The bank said trading in April had been in line with first quarter trends and it was content with current forecasts for 2011, which expect profits to rise to about 7 billion pounds.

Credit Suisse, Switzerland's second-largest bank, on Wednesday reported record first-quarter investment banking revenue as it gained market share and client activity rose.

Barclays said losses from bad loans dropped to 921 million pounds, down 39 percent from 1.5 billion a year ago.

That included the release of 190 million pounds on its loan to Protium, a fund set up over two years ago to ring-fence its toxic assets, following an increase in the value of the underlying assets.

Barclays wants to end a 10-year loan to Protium early, and said the purchase of some outstanding financial interests this month will help facilitate that exit.