Europe's banking sector is likely to see a wave of consolidation in the next 12 months as banks shed weaker units and focus on areas where they are stronger, Barclays CEO Bob Diamond said in an interview with Singapore's Business Times newspaper.

Banks will make sure they're only doing things where they have some kind of competitive edge and scale, and exiting activities where they do not have a competitive edge and are sub-scale, the Business Times quoted Diamond as saying.

Barclays, for instance, got out of retail banking in Russia and Indonesia because it lacked the scale, but grew its big and global cards business by buying Egg's credit card business, he said.

He added the UK bank had few concerns about its European exposure.

Most of our exposure in Europe is in the retail business, mainly mortgages. We don't worry about that because mortgages are collateralised and have low loan-to-value ratios, he said.

The Barclays CEO said the main problem facing most European banks was the lack of consolidation and restructuring, rather than a lack of capital.

If you look at the European banks that failed the stress tests, the main reason they failed is that they hold their own government debt. Is that a bank capital issue or is that a sovereign risk issue, he said.

A Barclays spokesman in Singapore confirmed the report.

(Reporting by Kevin Lim; Editing by Muralikumar Anantharaman)