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Barclays sets aside £700m more for PPI claims

Barclays (LSE: BARC.L - news) has allocated an extra £700m to pay compensation claims for the mis-selling of payment protection insurance.

The news came as the banking group reported a £1.2bn loss for the first half of 2017 after the sale of part of its business in Africa.

However, if Africa-related issues are stripped away from this, the bank's pre-tax profit was up 13% year-on-year to £2.341bn.

The group reduced its stake in its African operations as part of a global re-think revealed last year - it recently sold 33.7% of Barclays Africa so it could focus on operations in Britain and the US.

It retains about 15% in the African business.

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The bank said it expected its performance to improve over the next two years due to a £1bn drop in costs.

The Bank of England recently warned about the risks to the UK economy posed by a rapid rise in consumer credit but Barclays chief executive Jes Staley said he was more worried about the recent drop in consumer confidence than he was about lending levels.

He said: "There are signs telling us to be cautious but we don't see things actually in the numbers that would raise any great concern.

"We are still very constructively engaged with the UK consumer and extending credit and we hope the UK economy continues to move forward."

Mr Staley said: "The Brexit negotiations are going to be very complex and we are going to be living with uncertainty for at least the next couple of years.

"Given that uncertainty, I think a lot of companies and businesses around the UK will have to start contingency plans early."

For its part, Barclays is understood to be adding 150 staff to its Dublin operation to respond to any Brexit-related disruption.

Laith Khalaf, senior analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news) , said the banking group's results were "perplexing".

He said: "The sale of Barclays Africa and more PPI costs are the main culprits for the bank's woes so far in 2017.

"The bank's pension black hole has more than doubled in size since the last funding valuation, thanks to falling government bond yields.

"That's going to cost the bank an extra £4.5bn, spread over the next 10 years.

"However, in the madcap world of valuing pension liabilities, it's entirely possible that the deficit may fall by the time the next valuation comes round in 2019, if interest rates have risen by then."

Barclays shares were up 1.1% in early trading.