Barclays sees profits slump 21pc

BARCLAYS HAS reported a 21 per cent slide in pre-tax profits and warned that Britain’s decision to quit the European Union could have a negative impact.

The bank’s profits fell to £2.06bn in the first half of the year and it said the increased risk of recession with lower growth, higher unemployment and falling UK house prices could have a negative impact on a number of its operations, most notably its mortgage offering.

Barclays also warned that if Brexit negotiations end with the UK’s financial sector losing “passporting” rights, it would need to make alternative licensing arrangements in EU jurisdictions where it operates.

Banks wanting to trade with a country in the European Economic Area must apply for a passport, which allows them to sell their products to any country within the zone.

However, the European Central Bank has warned that Britain would not be able to access the passporting system without remaining a member of the single market and abiding by its rules, which includes the free movement of people.

“The result of the referendum means that the long-term nature of the UK’s relationship with the EU is unclear and there is uncertainty as to the nature and timing of any agreement with the EU,” said Barclays.

“There is a risk of uncertainty for both the UK and the EU, which could adversely affect the economy of the UK and the other economies in which we operate.”

Despite the warning there was good news about Barclays’ core operations as a corporate makeover under CEO Jess Staley shows signs of paying off.

Mr Staley is simplifying the bank’s structure through the sale of the bulk of its African business and other assets, to become a transatlantic bank focused on the US and Britain.

It said profits from its core businesses, which include consumer and commercial lending, credit cards and investment banking, rose 19 per cent to £2.4bn in the first half.

Mr Staley said: “Taken together, the picture in the second quarter is one of strong and accelerating progress against our strategy.”

The fall in overall profits was largely due to a loss of £1.9bn on the non-core assets the bank has committed to offload by the end of 2017, despite prospects of a possible economic downturn following the Brexit vote.

The bank booked a £372m impairment on the French retail banking business it is in talks to sell. Other assets earmarked for sale include its Barclaycard consumer payments business in Spain and Portugal as well as almost all its Africa unit.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Barclays is a bit of a Jekyll and Hyde character at the moment, but Doctor Jekyll is starting to gain more control, as all the grisly bits of the bank get wound down.”

Confidence in Britain’s economic outlook has dropped sharply since voters opted to leave the EU last month, triggering a fresh bout of pessimism in a sector bruised by the costs of tighter regulation, restructuring and record low interest rates.

But Mr Staley said the bank had lent £2bn of mortgages to UK homebuyers since the Brexit vote, 8 per cent more than the same period last year.

Barclays has cut its dividend from 6.5p per share to 3p in order to maintain capital levels while it grapples with its revamp.

The bank also took an additional £400m impairment charge for consumer redress related to the mis-selling of payment protection insurance products in Britain, taking its total to £2bn.

Barclays is a bit of a Jekyll and Hyde character at the moment. Laith Khalaf, senior analyst at Hargreaves Lansdown