Barclays has reported a rise in profits in the first quarter, in line with expectations, but took a £228million hit from the collapse of lender MFS. 

A stronger performance at Barclays' investment bank helped to offset the overall rise in credit impairment charges. 

The bank reported profit before tax of £2.8billion in the three months to 31 March, up from £2.7billion a year earlier, while group income reached £8.2billion. 

However, the bank's credit impairment charges increased to £823million, driven by a one-off £228million charge linked to the collapse of specialist lender MFS. 

The London-based lender, which specialised in complex property-related loans, was placed into administration in February, following allegations of financial irregularities and mismanagement.

It raised questions about risk checks at lenders, including Barclays, as investors grow jittery about risks in wider lending markets, including in private credit. 

Chief executive C.S. Venkatakrishnan, said: 'I am disappointed to recognise… a single name charge in the first quarter. This was in our securitised products business, and relates to a well-publicised, sophisticated fraud.'

He told reporters: 'This is very serious, we have to understand the implication of it for our bank and for other banks.' 

Barclays also raised its provisions to cover the motor finance redress scheme by around £100million. 

Shares fell 3.3 per cent to 413.4p this morning, leading the FTSE 100's biggest fallers.  

Income at the investment bank rose 4 per cent to more than £4billion for the first time, ahead of analyst forecasts of £3.9billion, driven by volatility in equity markets. 

Its global markets business reported a 6 per cent increase in income. 

However, analysts say Barclays has failed to capitalise on the market jitters as much as US banks, which have reported bumper results. 

Chris Beauchamp, chief market analyst at IG said: 'News that [Barclays] has failed to reap benefits in its trading division compared to US peers won’t help either – this is one of the core reasons for picking Barclays over other UK banks, and will weigh heavily on the shares.' 

C.S. Venkatakrishnan said the lender enjoyed a 'solid quarter' and announced a fresh £500million share buyback on Tuesday, following the completion of the existing £1billion programme. 

Across the bank's operations, a key measure of profitability, known as return on tangible equity, dropped to 13.5 per cent, down from 14 per cent by the same point a year ago. 

Costs were controlled, with the cost-to-income ratio improving to 56 per cent from 57 per cent. 

Richard Hunter, head of markets at Interactive Investor, said: 'The unexpected impairment charge has taken the headlines and the shares have added to a loss in the year to date of 11 per cent in a weak opening reaction. 

'Nonetheless, the results are broadly solid and the price remains ahead by 46 per cent over the last year, as compared to a gain of 23 per cent for the wider FTSE 100, and by 109 per cent over the last two years. 

'Alongside such success come higher expectations, as is in evidence today, but underpinned by the group’s financial strength and its geographical and business diversity, there is little to suggest that the current market consensus of the shares as a strong buy and the preferred play in the sector will be troubled following this update.'