Barclays has revealed profits were dragged down by its investment bank as well as another £900 million provision to cover PPI compensation, as cost cuts left the bank’s staff numbers at their lowest since 2007.
Adjusted pre-tax profits for the first half of the year fell 7 per cent to £3.35 billion on revenues down 12 per cent to £13.3 billion, with the bank blaming claims-management companies for the extra money put aside for people mis-sold payment protection insurance.
Barclays’ total bill now stands at nearly £5 billion out of an industry-wide payout estimated at more than £20 billion.
Barclays has been slashing jobs across the group as it seeks to cut costs with staff numbers now at 135,000, down a net 5000 over the first six months of the year. The investment bank alone accounted for 2500 of the lay offs.
Video: Things are changing in relation to 'dark pools'
Profits from the division, once the bank’s star performer, slumped by 46 per cent to £1.1 billion as income fell 18 per cent to £4.3 billion.
But chief executive Antony Jenkins said the unit — the cause of much controversy — was “about where we want it to be”, and some analysts in the City had feared worse.
Barclays has been shrinking its investment bank and moving into less-risky areas. Its other businesses partially offset the unit’s decline with the internal “bad bank” a highlight; losses there fell 27 per cent.
Shares reacted strongly, with Barclays rising nearly 5 per cent to 229.47p.
Jefferies analyst Joseph Dickerson hailed a “solid” performance while Brenda Kelly, chief market strategist at IG, said even with the PPI provisions and the investment-bank struggles “the bank still swung back into (net) profit, a measure of just how resilient the other parts of its business are”.
There will be no repeat of last year’s controversial 10 per cent bonus boost for investment bankers, Barclays said, and bonus accruals are down on last year “in line with performance”.
Finance director Tushar Morzaria also said Barclays’ controversial “dark pool” share-trading exchange had “bounced back”.
Volumes had slumped in the wake of claims by the New York attorney general that the bank misled clients into believing they would be protected from “predatory” high-frequency traders.
Barclays is fighting the lawsuit, but because it has extended a non-prosecution agreement with the US Department of Justice the bank won’t be prosecuted if it loses its attempt to have the lawsuit dismissed.