Banking giant Barclays saw a 33% drop in profits to £2.6 billion in the first half of the year as the payment protection insurance scandal took its toll.
The group, one of Britain's top five banks, set aside £1 billion in the six months to June 30 to cover compensation for customers who were mis-sold PPI.
But stripping out the PPI provision, Barclays would have seen profits increase 24% to £3.7 billion in the period - ahead of City expectations.
The figures are the latest in a week of half-year banking results, which started yesterday with HSBC revealing a better-than-expected 3% increase in pre-tax profits to 11.5 billion US dollars (£7 billion).
The group saw reported pre-tax profits at its retail and business banking division drop 63% to £446 million, but this includes the PPI hit.
The division recorded a slight increase in the number of UK mortgage accounts - from 913,000 to 925,000 - as well as a boost to current account numbers from 11.4 million to 11.7 million.
But its investment banking division, Barclays Capital, saw a decline in both adjusted and reported pre-tax profits, down 9% to £2.3 billion and 29% to £2.4 billion respectively.
The bank recorded a 41% drop in bad debt charges to £1.8 billion as a result of closer management of its risks in troubled eurozone countries including Spain and Portugal.
Barclays offered some reassurance for the UK Government, confirming it was meeting its Project Merlin agreements after lending £20 billion to businesses in the first six months, in line with its £40 billion target for the full year.
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