Barclays’ half-year profit rises but cover for bad loans soars to £900m
The banking giant said its pre-tax profit hit £4.6bn in the six months to the end of June, up from £3.7bn the same time last year.
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Your support makes all the difference.Barclays has reported a jump in its half-year profit but set aside an impairment charge of £900 million to cover expected loan losses.
The banking giant said its pre-tax profit hit £4.6 billion in the six months to the end of June, up from £3.7 billion the same time last year.
The previous year it had suffered a hit from a trading blunder in its US structured products division.
The multinational bank’s second-quarter profit also beat market expectations at £2 billion, ahead of the £1.9 billion expected by analysts.
However, like rival lender Lloyds Banking Group, it marked a slowdown from the previous quarter, which saw a record-high £2.6 billion profit.
British banks have come under pressure this year to do more to pass on interest rate rises to savers, while mortgage rates have spiked.
Barclays maintained that stress levels remain low among its customers despite interest rates currently standing at 5% and households facing big increases in their monthly mortgage repayments.
But the threat of more people struggling with their debt prompted the lender to set aside an impairment provision of nearly £900 million, more than double the charge last year.
Barclays said the charge reflects higher interest rates, which has pushed up the cost of borrowing, higher credit card balances in the US, and “normalising delinquencies” – which means customers falling behind on their debts.
Furthermore, it saw a decline in activity in its corporate and investment bank division amid greater market volatility.
But Barclays’ finance director, Anna Cross, said its customers were being “cautious and resilient” in the face of higher living costs.
Around a quarter of its mortgage borrowers have been overpaying monthly repayments in efforts to reduce their outstanding loan before fixing to a new, more expensive, mortgage deal, Ms Cross said.
She also said that its banking customers were using their savings to manage higher costs and pay down debts.
Group chief executive CS Venkatakrishnan said: “We have positioned Barclays carefully for this mixed macroeconomic environment and delivered a consistent performance in the second quarter.
“Looking forward, we are very confident of meeting our targets for the full year.”