We are currently trialling our new-look independent.co.uk website - please send any feedback to beta@independent.co.uk

Business News

Barclays takes £300m hit on mis-sold PPI claims


Banking giant Barclays took an additional £300 million hit to cover payment protection insurance mis-selling claims today but unveiled a higher-than-expected rise in quarterly profits.

The bank has now set aside £1.3 billion to deal with PPI compensation after a recent increase in the number of claims, which have eaten into the profits of its UK arm.

However, stripping out the cost of PPI and other one-off costs, the bank reported a 22 per cent rise in pre-tax profits to £2.4 billion - against City expectations of around £2 billion - as the UK's retail banking division and Barclaycard performed well.

Barclays chief executive Bob Diamond has been in the spotlight recently over his £17.7 million pay package for 2011, which is expected to come under increased scrutiny at the bank's annual meeting tomorrow despite recent moves to quell a shareholder rebellion.

Santander UK also released its first quarter results, which showed pre-tax profits falling 40 per cent to £347 million amid a challenging economic environment, low interest rates and higher funding costs.

Barclays reported a 5 per cent increase in total group income to £8.1 billion, which included a 3 per cent rise in income at its investment bank Barclays Capital.

UK retail banking - all business directly with consumers such as current accounts - saw underlying pre-tax profits rise 16 per cent to £334 million.

Barclays said it issued gross new lending of £10.1 billion to households and business, which was flat on the previous year.

The bank also raised £1.5 billion of loans under the Government's National Loan Guarantee Scheme - the so-called credit easing initiative designed to reduce the cost of credit for small businesses.

The group held its quarterly dividend at 1p a share.

The hit from bad debts was reduced by 16 per cent to £778 million in the quarter, while it also cut its exposure to troubled eurozone countries Portugal, Ireland, Italy, Greece and Spain by 16 per cent to £6 billion.

Barclays made no reference to the furore surrounding Mr Diamond's pay, which has been brewing in recent weeks, in its first quarter update.

Last week, Mr Diamond agreed not to receive half of his £2.7 million all-shares bonus award for 2011 if certain performance targets are not met within three years.

But the move did not address previously awarded long-term incentives and a £5.7 million tax payment made on Mr Diamond's behalf.

While major investor Standard Life welcomed the concession and said it would now back the bank's remuneration report, many shareholders are still expected to raise their opposition at tomorrow's meeting.

The Institute of Directors (IoD) yesterday added to the growing voice of concern as its director-general Simon Walker said bonuses at Barclays were too high and that the bank should not be run "for the benefit of its top executives".