Barclays has revealed a 40% slump in profits after putting aside £1.5bn to cover a US trading blunder and potential customer loan defaults.
The UK bank said pre-tax profits tumbled between April and June – from £2.5bn a year earlier to £1.5bn – falling short of the analysts’ consensus forecast of £1.6bn.
The lender was knocked by a jump in conduct costs, which surged to £1.3bn from £143m a year earlier, after it was forced to start the process of buying back US securities that it had not been authorised to sell. Some of that money has been put aside to deal with the potential fine expected to be levied by US regulators over the error.
The bank also took a £200m charge to cover potential defaults on its loans in the second quarter. Barclays said it took account of the “headwinds” posed by surging inflation and its effect on borrowers who were facing higher bills. That is more than the £797m it was able to release last year amid more optimistic economic forecasts.
It came as the price of essentials including food and fuel pushed UK inflation to a 40-year high of 9.4% in June.
However, Barclays said it expected impairment charges linked to potential defaults to now remain below pre-pandemic levels, partly due to a drop in borrowing through unsecured products like credit cards.
The bank’s chief executive, CS Venkatakrishnan, said the bank was “alert to the pressure that the rising cost of living will have on our customers and colleagues. We have a range of measures in place to help and are looking to do more.”
The lender also reported a total 31% slump in investment banking fees to £1.2m in the first half of the year, reflecting a slowdown in deals and takeover activity by businesses that have been concerned about the weaker economic outlook.