Barclays half-year profits treble to £5bn as it claws back bad debt provisions

Barclays has reported a trebling of first half profits to £5bn, partly aided by a decision to unwind provisions it made for bad loans during the height of the coronavirus pandemic.

The bank said it had clawed back £742m from a £3.7bn charge it booked during the same six-month period in 2020 – a time when it, and rivals, prepared for the possibility that the crisis would deliver a deluge of defaults as the economy collapsed.

Barclays forecast that bad loan charges would remain below historical levels due to government support for business customers and the improved outlook as its key markets emerge from the COVID-19 disruption.

Image: The UK-based bank said UK income rose 1% and it was encouraged by signs of returning demand for consumer credit

It reported low default rates on unsecured lending.

Barclays said it would initiate a new share buy-back of up to £500m and resume paying an interim dividend, revealing a sum of 2p per share for the first half of the year, after the Bank of England scrapped its precautionary curbs on payouts for the sector.

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Taken together, they amount to a return of almost £1bn.

Its pre-tax profit performance was better than the £4.1bn expected by banking analysts.

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It was led by earnings from its investment bank operations given, Barclays said, the “benign” environment for credit as rates hovered at record levels.

UK income rose 1% to £3.2bn, resulting in profits rising from £68m to £1.5bn.

It admitted group pain from a 10% swing in sterling strength versus the dollar – erasing some of the gloss from its investment banking arm which has been championed by chief executive Jes Staley.

Image: Jes Staley has fought off investor pressure to slim down the investment banking arm

Nevertheless, equities fees rose 38% while investment banking fees from advising on deals were up 27%.

Mr Staley told investors: “Our investment banking fees and equities businesses have delivered record income, and we are seeing encouraging signs of recovery in consumer banking.

“Our profitability, strong capital position and balance sheet have enabled us to increase capital distributions to shareholders.

“We are starting to see the resurgence of activity across our businesses, with group income up on the same period last year when excluding the impact of FX (currency) movements.”

Barclays warned that costs during 2021 were tipped to exceed those of 2020 due to a number of factors, including a previously revealed real estate review that will shrink office space as more staff continue to work from home.

Shares rose by 4% at the market open.

John Moore, senior investment manager at Brewin Dolphin, said: “Barclays undertaking a further share buyback and upping its half-year dividend marks another step on the road to recovery for the UK’s major banks and financial sector, at large, from the dark days of dividend suspensions.

“The bank’s reduction in provisions for impairment charges, more positive outlook for its retail operation, and robust capital position will be welcomed by investors, but cost increases – whilst not significantly affecting these results – remain a threat in a low interest rate and net interest margin environment.”