Barclays GroupJul 28 2017

Barclays half-year results scarred by PPI claims

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Barclays half-year results scarred by PPI claims

Barclays shares are down around one per cent this morning (28 July) despite the bank reporting a 13 per cent jump in pre-tax profits for the first six months of the year as further cash was set aside for payment protection insurance claims.

The bank made provision for a further £700m of payment protection insurance (PPI) claims, £300m higher than the level of provision made for PPI in the same period last year.

The Financial Service Authority has set a deadline of 29th August 2019 for customers to make PPI claims.

Banks analyst Rob James, who works for Old Mutual Global Investors, commented yesterday that the announcement of a deadline has resulted in a spike in claims impacting the banking sector as a whole.

He added that: “It would be a brave man who would predict that this is the end of banks having to make provision for PPI, but at least we now know when the deadline is.”

Lloyds Banking Group similarly made a provision of just more than £700m for PPI claims in its results announcement on 27 July.

A key number looked at by many analysts in the “core tier one ratio”, which is the proportion of a bank’s total assets held in assets that meet the regulatory definition of “low risk”.

Barclays results this morning show that this measure had improved to 13.1 per cent, up from 12.4 per cent at the end of the 2016 calendar year.

This is important to the investment case for Barclays shares as the higher that ratio gets to, the greater the capacity of the bank to increase dividend payouts.

Barclays previously cut its dividend in February 2017.

The bank has been embarking on a strategy of “divesting” its non core assets, and the sale of its Africa business happened during the period covered by these results.

Barclays declared a dividend of 1p per share and reaffirmed its commitment to paying a dividend of 3p per share for the full year.

In his statement to accompany the results, Barclays chief executive Jes Staley asserted that the restructuring “is now at an end” and brings forward the date at which “shareholders can benefit from the full earnings power of this business.”

David.Thorpe@ft.com