BARCLAYS PROFITS DOWN 1% TO £7.1BN

The profits were broadly flat on the previous year, down 1% against the £7.14 billion record haul seen in 2006 as Barclays was forced to make hefty write-downs amid the meltdown in America's sub-prime mortgage market and subsequent credit squeeze.

The group has warned of further challenges amid a slowing economy in the US and UK, but said its "resilient" performance last year gave it greater confidence to weather the storm.

Barclays - the first of the "big five" UK banks to report annual results - revealed it had set aside £2.8 billion in bad debt charges and impairment provisions, up 30% on the year before.

But the group said the increase was largely down to a £782 million hit from exposure to the US high risk home loan defaults and the credit turmoil.

Arrears and defaults within its retail banking and Barclaycard arm "significantly" improved, down 7% to £2.01 billion, according to the group.

John Varley, Barclays group chief executive, said: "Barclays delivered a resilient performance in 2007 in a year of contrasting market conditions."

He added the group was "not immune from the impact of the credit market turbulence" in the second half.

Mr Varley cautioned that Barclays would "will have to be disciplined in our risk management and rigorous in our approach to lending" as the economic slowdown took hold.