Profits at Barclays plunged to £1.27bn in the first half of the year, down from the £3bn reported in the first half of 2019.
Total income increased 8% to £11.6bn in the period, though Barclays UK income fell by 11% due to ongoing margin pressure, including Covid-19 related customer support actions, base rate reductions, lower UK cards interest earning lending and overdraft balances, as well as lower income due to the removal of certain fees in overdrafts and UK cards.
Operating expenses fell by 3% to £6.5bn, however, reflecting cost efficiencies and continued cost discipline across the group.
Despite a positive operating leverage from the increase in total income and reduction in operating expenses, this was offset by “materially higher” credit impairment charges.
In the half-year period, credit impairment charges soared to £3.7bn, up from £0.9bn recorded the year prior. The charges include an extra £1.6bn that was set aside in the second quarter of trading.
Given the uncertain economic outlook and low interest rate environment, Barclays now expects the second half of the year to “continue to be challenging”.
While income at Barclays UK is expected to gradually recover from Q2 levels, certain headwinds, including from the low interest rate environment, are “likely to persist” into 2021.
Jes Staley, CEO, said: “This has been a period focussed on supporting our customers, clients and the UK economy through the Covid-19 pandemic – providing the people and businesses that we serve with a bridge to recovery in every way we can.
“Since late March, we have helped to deliver around £22bn of vitally important Covid-19 government support measures to UK businesses to help fund them, including c.250k government backed Bounce Back Loans totalling c.£7.7bn, c.£2.5bn under the CBILS programmes and c.£11.7bn of commercial paper issuance.”
He added: “The reason that we have been able to support the economy as extensively as we have and remain financially resilient is because of our diversified universal banking model.
“Our strength in diversification has delivered pre-provision profits of £5.0bn and, even after impairment, we remain profitable. Income increased 8% to £11.6bn for the half, with total costs down 4% to £6.6bn resulting in positive jaws of 12%, and an improved cost to income ratio of 57% versus prior year.”