LONDON: Barclays set aside a higher than expected £1.6 billion ($2.1 billion) to cover a possible rise in loan losses in the second quarter and warned that a grim outlook and low interest rates would hurt profits into 2021.
The COVID-19 pandemic has forced banks globally to set aside billions to cover bad loans, and the British bank’s consumer business is under pressure from lower interest rates, smaller credit card balances and personal loan repayment holidays.
Barclays booked pre-tax profit for the first half of the year of £1.3 billion, down from £3 billion a year ago as provisions against potential bad debts outweighed improved revenues from its investment bank.
The bank’s shares were down 3.5 percent in early trade.
Barclays’ trading performance was a bright spot as virus-induced market volatility prompted a 60 percent jump in trading revenues in foreign-exchange, rates and credit trading.
Overall, the markets division posted a 49 percent rise in revenue to £2.1 billion, an endorsement of the strategy adopted by CEO Jes Staley, who has championed the investment banking business, contrary to the wishes of activist investor and top shareholder Edward Bramson, who wants to shrink the sector as part of a program to slash costs.
Barclays was expected to report credit impairment charges and loan loss provisions of £1.42 billion for the April-June period, according to an average of analyst forecasts.