Barclays sees half-year profits surge 82% but costs still to be cut

Banking giant Barclays has cheered its highest half-year profits for nearly a decade, but warned costs will need to be slashed over 2019.

The lender reported an 82% surge in statutory pre-tax profits to £3.01 billion for the six months to June 30 as it put hefty mis-selling charges and settlements behind it.

On an underlying basis, interim pre-tax profits fell 15% to £3.1 billion.

The lender reiterated warnings that keeping a tight lid on costs is a “priority” and said they will need to be reduced over the year to below £13.6 billion as it battles against a “challenging income environment”.

It revealed 3,000 jobs had been cut in the second quarter out of an 83,500-strong workforce, although this largely affected what the bank described as “non revenue producers”.

The first-half statutory profit compares with £1.7 billion a year earlier, when it was hit by costs of the payment protection insurance (PPI) scandal and a £1.4 billion settlement with US authorities over its sale of mortgage-backed securities in the lead-up to the financial crisis.

The group did not put any further money aside for PPI mis-selling claims, in contrast to its rival Lloyds Banking Group on Wednesday, which revealed another £550 million hit.

Barclays said it still had £360 million left in PPI cash set aside, but admitted there was increased “uncertainty associated with future claims levels” amid a late surge ahead of the August 29 deadline.

Jes Staley, group chief executive of Barclays, said it was “another resilient quarter of performance”.

He added: “Management focus on cost control remains a priority, and we expect to reduce expenses to below £13.6 billion for 2019.

“This all puts us in a position to continue to increase the return of capital to shareholders by declaring a half-year dividend of 3p.”

Its statutory results showed £114 million in litigation and conduct costs, down from £2 billion a year earlier.

The pressure on income was felt in its UK retail bank, which saw income fall 2% to £3.5 billion as profit margins were knocked amid fierce competition, although this was partially offset by growth in mortgages and customer deposits.

Underlying pre-tax profits fell 11% to £1.1 billion in the retail bank.

Its corporate and investment bank saw pre-tax profits fall 15% to £1.7 billion in the first half as equities income tumbled 17%.

The figures come after a year that has been dominated by a battle between the Barclays board and US activist investor Edward Bramson.

His bid to gain a seat on the board was defeated in a May shareholder vote, but he has said he will continue to push for cuts to the investment banking arm amid concerns over its performance.

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “These are a really mixed, and pretty messy set of numbers.

“The lack of PPI compensation and US mortgage fines mean that on the face of it, this half has been a big step forward on last year, however, the underlying numbers are less rosy.”