Barclays Profits Plunge on Further Impairment Charge Provision

Barclays Bank’s pre-tax profits have taken a big hit for the second quarter of the year on the back of an extra £1.6bn provision for bad debts brought on by the COVID crisis.

Barclays pretax profits for the first six months of 2020 are down by over fifty percent to £1.27bn, compared to the same period last year at £3.01bn. The biggest fall was in pre-tax profits for the second quarter of 2020 at £359m, compared to £1.59bn for the first quarter of 2019. Barclay’s own estimate for first-quarter profits for 2020 was £491m.

The Bank has warned of further stormy weather ahead, with their loan-loss reserves now standing at £3.7bn as the pandemic effect on the UK’s economy continues to bite.

Under its loan support for consumers and businesses hit by the crisis, Barclays has granted more than 600,000 payment holidays. Credit impairment charges and provisions for loan losses came in over £200m above analyst expectations.

“Our consumer business income decreased by 11% in Barclays UK and 21% in CC&P (consumer, cards, and payments) as a result of the lower interest rate environment, fewer interest-earning balances, reduced payments activity and action to provide support for customers”.

Barclays’ investment bank income rose 31% over the first six months of 2020 to £6.9bn – led primarily by its markets business.

According to Barclays chief executive Jes Staley:

“Our CET1 (common equity tier one ratio) stands at 14.2% which underscores the strength of our balance sheet”. Although we will remain well-capitalized and ahead of our minimum requirements, we may experience stronger capital headwinds in the second half of the year. The Board will decide on future dividends and capital returns at the year-end 2020. While the remainder of 2020 will be challenging, our diversified model means we can remain financially resilient and continue to support our customers and clients.”