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Barclays sets aside extra £400m for PPI claims

Barclays sets aside extra £400m for PPI claims

Barclays Bank has made an extra provision of £400m to cover the cost of dealing with complaints about its mis-selling of payment protection insurance.

The further costs bring the total amount Barclays will have spent so far on compensating UK consumers who bought PPI to £7.8bn.

In its results for the six months to 30 June, the bank reported 1.7m customer claims linked to PPI had been received and processed, up from 1.6m at December.

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Pre-tax profits stood at £2bn, down from £2.6bn for the same period a year ago.

The bank’s bottom line was hit by losses of £1.9bn from what it termed ‘non-core’ parts of the business, including those related to its French wealth management arm, which it is in the process of selling.

Barclays’ UK business reported underlying profit before tax down 4 per cent to £1.3bn.

Personal banking income increased 1 per cent to £1.8bn, driven by improved deposit margins and balance growth, partially offset by a lower mortgage margin.

Looking forward, the results pointed to increased risk of a UK recession with lower growth, higher unemployment and falling UK house prices. It noted this would likely negatively impact a number of Barclays’ portfolios, notably: higher loan-to-value mortgages, UK unsecured and commercial real estate exposures.

Chief executive James Stanley said the bank is on course and plans will not change in light of Brexit. “Taken together, the picture in the second quarter is one of strong and accelerating progress against our strategy.

“We remain confident that it is the right plan for Barclays, and see no reason to adjust it, or the pace of delivery, in light of the vote by the UK last month to exit the EU.”

Laith Khalaf, senior analyst, 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”.

“If and when Barclays gets rid of its non-core businesses it should start to look more like an upstanding citizen of the banking sector, but that is still going to take until 2017 at least, a decade after the banking crisis kicked off.

Unlike Lloyds, Barclays hasn’t announced any further job losses or branch closures. That lends credence to Lloyds’ assertion that the changes were a strategic response to changing customer trends, in particular a move to digital banking. If Barclays had followed suit, it would have looked like the banks were looking to cut costs in the face of the economic uncertainty caused by Brexit.

“Barclays remains a bank in transition and more skeletons may come out of the closet as the bad bank is gradually disposed of. The risk is an economic storm hits while Barclays is still mending the roof.”

laura.miller@ft.com