Barclays added an extra £1.6bn to its reserves for unhealthy loans within the second quarter as the size of the harm coronavirus may wreak on Britain’s banks turns into clearer.
Credit score impairment prices greater than tripled from £408m in the identical interval final yr, as strict lockdowns to sluggish the unfold of Covid-19 devastated the worldwide financial system.
The availability for unhealthy loans was worse than the £1.4bn analysts had forecast. Within the first quarter Barclays reserved £2.1bn, among the many most conservative provisioning of any European lender, taking its whole up to now in 2020 to £3.7bn.
The cost helped depress internet revenue 91 per cent to £90m within the interval, half the £180m anticipated by analysts. Revenue earlier than tax fell 76 per cent to £359m, the London-based bank mentioned on Wednesday, lacking the £491m common forecast of analysts.
“While the remainder of 2020 will be challenging, our diversified model means we can remain financially resilient,” mentioned chief govt Jes Staley.
“Although we will remain well capitalised . . . we may experience stronger capital headwinds in the second half. The board will decide on future dividends and capital returns at the year-end.”
The Covid-19 blow was tempered by a 49 per cent leap in buying and selling earnings, because the funding bank benefited from excessive volumes in exceptionally turbulent markets as corporations scrambled to boost emergency funds and hedge exposures. Nonetheless, total group income fell four per cent to £5.3bn as earnings in each the UK and bank card divisions fell.
Mounted-income income surged 60 per cent, however nonetheless lagged behind its bigger Wall Street rivals corresponding to JPMorgan, Goldman Sachs and Morgan Stanley, the place revenues greater than doubled. European peer Deutsche Bank posted a 39 per cent acquire in the identical enterprise.
Elsewhere within the funding bank, fairness buying and selling rose by a couple of third and costs from debt capital markets climbed by 1 / 4, however M&A advisory plunged 61 per cent as offers dried up throughout lockdown. In consequence, total pre-tax income on the funding bank rose 17 per cent to £1bn within the interval.
The efficiency, off the again of a equally good first quarter, will reinforce Mr Staley’s case for preserving Barclays’ buying and selling arm, which he has lengthy argued is a priceless counterbalance to its conventional UK client and worldwide bank card companies, which accounted for greater than half of credit score impairment prices.
“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,” Mr Staley mentioned. “Even after impairment, we remain profitable.”
The funding bank has been topic to a multiyear assault from outstanding activist investor, Edward Bramson, who has led a number of unsuccessful campaigns to shrink the division and unseat the chief govt.
Barclays’ capital ratio got here in at 14.2 per cent, up from 13.1 per cent on the finish of March, because it was compelled to preserve capital when the Bank of England all-but banned dividends within the spring in response to Covid-19.
Nonetheless, Barclays stock has fallen 38 per cent this yr, underperforming the benchmark FTSE index.