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Barclays profits up 11% but redress provisions rising

Barclays profits up 11% but redress provisions rising

Barclays’ half year report has revealed 11 per cent growth in group adjusted profit before tax to £3.7bn in the six months to the end of June, although the bank still had to set aside significant sums for litigation and redress on either side of the Atlantic.

Additional UK customer redress provisions of £1.03bn were made - up from £900m in the first half of 2014 - based on an updated estimate of future redress and associated costs.

This includes additional charges for payment protection insurance redress based on an updated estimate of future redress costs of £750m - down from £900m in the first half last year - £600m of which was recognised in the second quarter this year. As of June, the PPI redress provision held was £1.2bn, up from £1.06bn in December.

The results noted progress on legacy litigation and conduct matters, with settlements of £1.6bn reached with a number of authorities in the second quarter in relation to industry-wide investigations into sales and trading practices in the foreign exchange market and setting the US Dollar ISDAFIX benchmark.

Provisions held for legal, competition and regulatory matters were reduced to £484m from £1.69bn in December, although additional provisions of £800m were made for ongoing investigations and litigation primarily relating to foreign exchange, taking the total provisions recognised to over £2bn.

John McFarlane, executive chairman at Barclays, said that while settlements were reached with certain authorities in the first half of the year, “there is more to resolve”.

A priority across the group is to instill a high performance ethic and process, underpinned by an enhanced values driven culture, he stated.

“We need to be much more customer and client orientated in our approach, to streamline and eliminate unnecessary and cumbersome bureaucracy, and to embed direct accountability for activities within our businesses.

“Crucially we must do this in a way which is consistent with our values, and with strong controls in place, so that we build this business in the right way. There is a lot we can do to accelerate our progress and the work has already begun.”

In terms of the wealth management business, income reduced 9 per cent during the first six months this year to £493m, primarily as a result of the impact of customer redress in the US.

Client assets decreased £8.7bn to £142.6bn primarily due to the announced disposal of the US wealth business and ongoing strategic market exits.

The bank managed 7 per cent reduction in total adjusted operating expenses to £8.2bn and a 5 per cent reduction in operating expenses, excluding costs, to achieve to £7.9bn, driven by savings from strategic cost programmes.

peter.walker@ft.com