Banking giant Barclays has announced its highest half year profits for nearly a decade, as profits leapt 82 per cent at £3.01bn.
The group’s results for the six months to June 30 were up from £1.7bn a year earlier, when it was hit by costs of the payment protection insurance (PPI) scandal and a £1.4bn settlement with US authorities over its sale of mortgage-backed securities in the lead up to the financial crisis.
However, the bank repeated warnings that cost cutting is a “priority” and said costs will need to be reduced over the year to below £13.6bn as it battles against a “challenging” income environment.
On an underlying basis, interim pre-tax profits fell 15 per cent to £3.1bn.
The lender did not put any further money aside for PPI mis-selling claims, unlike rival Lloyds Banking Group.
Barclays said it still has £360m left in PPI cash set aside, but admitted there was increased uncertainty associated with future claims levels in case of a late surge ahead of the August 29 deadline.
Jes Staley, group chief executive of Barclays, said: “This was another resilient quarter of performance.
“Management focus on cost control remains a priority, and we expect to reduce expenses to below £13.6bn for 2019.
“This all puts us in a position to continue to increase the return of capital to shareholders by declaring a half-year dividend of 3p.”
Richard Hunter, head of markets at interactive investor, said: “As Barclays ploughs through its to-do list with fluctuating degrees of success, the task of keeping such a complex business on track are clearly evident.
“The bank has decided that in light of the challenging income environment, it is better served concentrating on costs for the rest of the year which, while prudent, is something of a disappointment.”
Mr Hunter said there were some positives from the update, such as the cosmetic boost given to the numbers by a lack of repeating litigation and conduct charges.
“Given Barclays’ recent track record, it is too early to call whether these generally lower charges will become the norm,” he said.
“There is probably enough within the update for investors to continue to give the bank the benefit of the doubt, such that the market consensus of the shares as a buy is likely to remain intact.”
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “These are a really mixed, and pretty messy set of numbers. The lack of PPI compensation and US mortgage fines mean that on the face of it this half has been a big step forward on last year, however, the underlying numbers are less rosy.”
Mr Hyett said margin pressure in the UK mortgage market has dented income at home, while the corporate and investment bank has done better than a relatively pessimistic market had expected.
“If there’s one thing these numbers do drive home it’s the advantage Barclays enjoys from a relatively diversified business model,” he added.
“The UK retail market looks like it’s becoming more and more competitive, particularly mortgages, and a squeeze on margins at the same time as the economic outlook is weakening is a potentially unpleasant combination.”
Barclays’ statutory results showed £114m in litigation and conduct costs, down from £2bn a year earlier.
The pressure on income was felt in its UK retail bank, which saw income fall 2 per cent to £3.5bn as profit margins were knocked amid fierce competition, although this was partially offset by growth in mortgages and customer deposits.
Underlying pre-tax profits in the retail bank fell 11 per cent to £1.1bn.
Its corporate and investment bank saw pre-tax profits fall 15 per cent to £1.7bn in the first half as equities income tumbled 17 per cent.
The figures come after a year that has been dominated by a battle between the Barclays board and US activist investor Edward Bramson.
His bid to gain a seat on the board was defeated in a May shareholder vote, but he has said he will continue to push for cuts to the investment banking arm amid concerns.
On Wednesday, Lloyds Banking Group, which owns the Halifax, reported a fall in first half pre-tax profits as its bill for the payment protection insurance scandal soared past £20bn amid a surge in late claims.
Lloyds said pre-tax profits fell 7 per cent to a worse-than-expected £2.9bn in the six months to June 30 after revealing another £550m hit from the mis-selling saga in the second quarter.
On a brighter note, the bank said the recent relaunch of the Halifax brand has been a success for the group.