Barclays today said it would have to fork out an extra £700 million to meet compensation claims for mis-selling payment protection insurance (PPI).
Group pre-tax profits jumped 13% to £2.34 billion for the six months ending in June, as the lender signalled the end of a major corporate restructuring designed to focus on its core UK and US business.
However, the legacy of the PPI scandal continued to affect the bank, with core profit before tax slipping 25% to £2.98 billion in response to the extra PPI provision.
Chief executive Jes Staley said: “Our business is now radically simplified, the restructuring is complete, our capital ratio is within our end-state target range, and, while we are also working to put conduct issues behind us, we can now focus on what matters most to our shareholders: improving group returns.”
The second quarter marked a milestone for the bank as it completed “two critically important planks” of its strategy to offload unwanted businesses.
The banking giant said it had driven down its majority shareholding in Barclays Africa Group to the extent where it can now apply for regulatory deconsolidation.
Barclays expects to complete this process next year. It has also run down its non-core unit ahead of schedule to below £25 billion in risk-weighted assets, meaning it could close the operation six months early.
Mr Staley added: “Accomplishing both of these milestones marks an end to the restructuring of the Barclays Group, and brings forward the date when our shareholders can benefit from the full earnings power of this business.
“That power is evident once again in the performance reported today.”
However, factoring in a £1.4 billion loss on the sale of 33.7% of Barclays Africa Group and a further £1.1 billion charge linked to the disposal, the bank recorded an attributable loss of £1.2 billion for the half-year.
This was down from a £1.1 billion profit over the same period in 2016.
Looking forward, the bank said it expects to boost its performance over the next two years thanks to a £1 billion drop in costs.
Group finance director Tushar Morzaria said the savings would be made “by not having to do much at all”, as restructuring costs fade and it finishes spending money on setting up the ring-fenced bank.
Mr Staley added that the bank was still “open for business” despite the Bank of England flagging the potential risks to the UK economy from a rapid rise in consumer credit.
He said Barclays was more uneasy about a recent dip in consumer confidence rather than lending levels, adding that the “impairment numbers we are seeing are not a concern at this point”.
He went on: “There are signs that are telling us to be cautious, but we don’t see things actually in the numbers that would raise any great concern. We are still very constructively engaged with the UK consumer and extending credit, and we hope the UK economy continues to move forward.”
On Brexit, Mr Staley said he had taken part in a meeting with Brexit Secretary David Davis and felt the Government was “reaching out to the business community”.
He said: “The Brexit negotiations are going to be very complex and we are going to be living with uncertainty for at least the next couple of years.”