Barclays bank has reported a 22% rise in profits to £2.4bn despite paying almost £300m more compensation for mis-selling payment protection insurance than expected.
The bank has now set aside £1.3bn to deal with PPI compensation after a recent increase in the number of claims, which have eaten into the profits of its UK arm.
But even after stripping out the cost of PPI and other one-off costs, the bank reported a 22% rise in pre-tax profits to £2.4bn - against City expectations of around £2bn - as the UK's retail banking division and Barclaycard performed well.
Barclays chief executive Bob Diamond has been in the spotlight recently over his £17.7m pay package for 2011, which is expected to come under increased scrutiny at the bank's annual meeting on Friday despite recent moves to quell a shareholder rebellion.
But the move did not address previously awarded long-term incentives and a £5.7m tax payment made on Diamond's behalf.
While major investor Standard Life welcomed the concession and said it would now back the bank's remuneration report, many shareholders are still expected to raise their opposition at tomorrow's meeting.
The Institute of Directors (IoD) yesterday added to the growing voice of concern as its director-general Simon Walker said bonuses at Barclays were too high and that the bank should not be run "for the benefit of its top executives".
Santander UK also released its first quarter results, which showed pre-tax profits falling 40% to £347m amid a challenging economic environment, low interest rates and higher funding costs.
Barclays reported a 5% increase in total group income to £8.1bn, which included a 3% rise in income at its investment bank Barclays Capital.
UK retail banking - all business directly with consumers such as current accounts - saw underlying pre-tax profits rise 16% to £334m.
Barclays said it issued gross new lending of £10.1bn to households and business, which was flat on the previous year.
The bank also raised £1.5bn of loans under the Government's National Loan Guarantee Scheme - the so-called credit easing initiative designed to reduce the cost of credit for small businesses.
The group held its quarterly dividend at 1p a share.
The hit from bad debts was reduced by 16% to £778m in the quarter, while it also cut its exposure to troubled eurozone countries Portugal, Ireland, Italy, Greece and Spain by 16% to £6bn.
Barclays made no reference to the furore surrounding Diamond's pay, which has been brewing in recent weeks, in its first quarter update.