Barclays underlying profit beats forecasts

Pre-tax profit for the six months to the end of June dropped to £1.66bn from £2.34bn a year earlier on unchanged revenue of £10.9bn. Conduct and litigation charges included £1.4bn to settle a US case involving mortgage bonds and £400m for payment protection insurance claims in the UK.

Excluding those costs, pre-tax profit rose 20% to £3.7bn as credit impairment charges almost halved to £571m from £1.05bn and underlying operating costs fell 5% to £6.7bn. The underlying profit number beat analysts’ average forecast of £3.2bn.

Jes Staley, Barclays’ chief executive, said: "The first half of 2018 has been characterised by strong financial performance and increased profitability. This first half performance shows a bank beginning to demonstrate its true potential and value. The numbers we have posted strengthen our confidence that Barclays can deliver attractive and sustainable profits, and in our ability to return a greater proportion of those profits to shareholders over time."

The FTSE 100 company said the credit impairment charge fell mainly because of recoveries in wholesale banking, improved US economic forecasts and repayment of card balances in the US – as well as adjustments under accounting standards. The charge is likely to be higher in the second half, it said.

Laith Khalaf, an analyst at Hargreaves Lansdown, said: "Barclays is moving in the right direction, but the champagne needs to be put on ice until the bank can deliver some consistency in its performance. Some of the improvement is down to falling bad loan provisions, thanks to upgraded forecasts for the US economy. While positive, that’s not something you can rely on to recur every quarter."

Barclays shares fell 1% to 189.82p at 08:19 BST.

Staley is seeking to show Barclays emerging from the prolonged effects of the financial crisis and past mistakes. The bank has paid out many billions in regulatory fines and Staley was fined by the Financial Conduct Authority for trying to root out a whistleblower.

The bank remains under pressure, though. The Serious Fraud Office has asked to the High Court to reinstate charges against the bank related to its emergency fundraising in 2008. Activist shareholder Edward Bramson is also working in the background after building a stake in the bank and has yet to go public with his demands for higher returns. Chairman John McFarlane is reported to have considered buying Standard Chartered to improve the bank’s growth prospects.

Shore Capital analyst Gary Greenwood, who rates Barclays shares ‘buy’, said: “Barclays’ shares continue to trade on a depressed rating, reflecting market concerns around the ability of the group to generate a return above its cost of equity … The market continues to price in no credit for successful delivery, in our view, despite the presence of a high profile activist investor on the register keeping management on its toes.”