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Barclays reports a 22 per cent rise in first-quarter profits

Trouble may be brewing ahead of the AGM tomorrow, but the bank's Q1 results were better than expecte

The British banking and financial services company Barclays has reported a profit before tax of £2.45bn for the first quarter ended 31 March 2012, an increase of 22 per cent compared to £2bn for the same period last year. 

Strong performance in investment banking helped to offset an increased compensation bill for a payment protection insurance (PPI) issue – Barclays’s exposure has risen by an extra £300m.

Meanwhile, one in four investors are expected to register protests for payment policies at the company’s annual general meeting tomorrow. Shareholders are reportedly concerned about a payment of £5.75m that was made to cover the cost of a tax bill incurred by Bob Diamond, chief executive of Barclays, when he relocated to London from New York to take charge.

Nonetheless, the company's profit after tax improved from £1.5bn last year to £1.87bn, while net operating income grew 8 per cent to £7.36bn (2011: £6.83bn). Barclays maintained a strong liquidity position with a liquidity pool of £173bn (2011: £152bn).

UK Retail and Business Banking (RRB) reported adjusted profit before tax of £334m (2011: £288m). Europe RBB and Africa RBB reported net operating income of £171m and £723m, respectively.

Barclaycard posted pre-tax profit of £349m (2011: £296m).

For the quarter, investment banking, corporate banking, wealth and investment management divisions reported pre-tax profits of £1.27bn, £219m, and £60m, respectively.

Diamond said: 

Barclays's first-quarter results are an encouraging start to the year and demonstrate continued progress across our execution priorities. We achieved an adjusted return on equity that exceeded 12 per cent, driven by strong results in UK RBB, Barclaycard, and Wealth and Investment Management and improved performances in corporate and investment banking. Our rock-solid capital, funding and liquidity positions remain a source of competitive advantage and enabled us to fund a substantial proportion of our 2012 term funding requirements.

The environment in which we operate remains unpredictable but we have a proven ability to adapt and grow our businesses in the face of external change. We will be proactive and seek to lead the agenda on recovery and resolution planning, which is a critical step to eradicate "too big to fail", while continuing to remain closely engaged with regulatory agencies and governments.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.