As with many other banks reporting financial figures, the UK bank reported a net release in provisions for credit losses, contrasting with last year, when it set aside billions of pounds to deal with fallout from COVID-19.

UK-listed Barclays today said that it had logged a pre-tax profit in the six months to 30 June of £4.979 billion ($5.26 billion), surging from £1.159 billion a year earlier, aided by its ability to swing from provisions for credit impairment changes last year to a net release in 2021 as the pandemic situation improved.

The bank also resumed its share buyback programme after the hiatus caused by the pandemic, and the move cheered investors. Shares in the bank were up 4.37 per cent around 09:30 am London time yesterday.

The group reported credit impairment releases of £742 million in H1 2021, against provisions for losses of £3.738 billion a year before. A number of banks’ profits have been boosted by the same factor.

Total income at the group dipped slightly – down by 3 per cent – to £11.315 billion in H1. As for total operating costs, they rose to £7.231 billion, up by 10 per cent on a year before, Barclays said in a statement. 

The banking group doesn’t break out financial performance of its wealth management and private banking business arms. (The bank is, however, stepping up private banking operations in regions such as Asia. See this article.)

“Conditions aren’t exactly ideal for banks right now – though you wouldn’t know that from Barclays’ profit before tax, which nearly quadrupled year-on-year," Nicholas Hyett, equity analyst at Hargreaves Lansdown, said. "Low interest rates always make turning a profit on loans more challenging. But to make matters worse consumers and businesses are increasingly paying down higher interest accounts."

Loans in the international consumer and cards business have fallen from £40.8 billion at the end of 2019 to £30.9 billion 18 months later, while UK customers have cut credit card borrowing by £1.1 billion since the start of the year. That trend does seem to be slowing as the economy reopens, and perhaps even going into reverse. But it’s a headache for Barclays nonetheless," Hyett said. "To make matters worse a 10 per cent fall in the value of the dollar versus the pound has undermined profits in Barclays' large US investment bank – which could have provided some insulation against the interest rate pressure."

"None of that matters all that much right now though, a huge swing in credit impairments has swept all before it in these results. And that’s likely to be a theme for the rest of the year. So long as the economic outlook continues to improve Barclays results will look rosier," he added. 

Barclays said that its cost/income ratio widened to 64 per cent from 57 per cent at the end of December 2020. Its Common Equity Tier 1 ratio of capital strength was unchanged at 15.1 per cent.

Buybacks
The bank decided to reactivate its dividend payments, starting a share repurchase programme of up to £500 million.

“Banks were ordered to halt capital payments early in the crisis in order to preserve capital, although that ban has now been lifted. Nevertheless, Barclays’ decision will be welcomed by investors this morning," Mark Crouch, analyst at multi-asset investment platform eToro, said. 

“Barclays has been able to reinstate its dividend, of course, due to its relatively strong second quarter performance in which it posted pre-tax profits of £2.6 billion - way in excess of the £400 million reported in the same period last year. This is partly down to the release of provisions for bad debts, which it has been able to do because of the improving economic outlook."