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Barclays suffers £1.2bn loss for first half of the year and sets aside additional £700m for PPI

Barclays suffers

Barclays has reported £1.2bn loss for the first half of the year which includes the sale of its Africa business

Primarily due to the sale of its Africa business, Barclays has reported a £1.2bn loss for the first half of the year. The sell-off is according to the strategy followed by Barclays to focus on transatlantic operations and centre its business activities on the US and the UK. On the same lines, the group is also centring its activities on its core business and moving out business which is considered non-core.

It is selling its non-core assets, and the sell-off in Africa is a part of it. Barclays sold a near 34% stake in Barclays Africa Group, leaving it with just 15% of the business. Selling of business in Africa has drastically changed the bank’s operations as it ended its approximately ninety years of presence in the continent. Meanwhile, Barclay Africa Group’s half-year profit was up to 7% which was driven by growth in local market and parts of Africa and a strong performance in corporate banking.

As a result of this step, its core capital ratio has increased to 13.1 per cent. The core capital ratio is a health indicator of its balance sheet. The bank predicts this figure to rise up to 13.4 per cent on final analysis. After scaling down its business in other parts of the world, the group will now centre exclusively on the US and UK.

Moreover, Barclays has marked a sum £700m for PPI. The bank is facing cases of Payment protection insurance or PPI and has decided to compensate customers. The news comes on the heels of the announcement by the bank of its partial closure of operations.

“The sale of Barclays Africa and more PPI costs are the main culprits for the bank’s woes so far in 2017”,

an analyst said.

“However in the madcap world of valuing pension liabilities, it’s entirely possible that the deficit may fall by the time the next valuation comes round in 2019, if interest rates have risen by then,”

the analyst said.

“Barclays’ interim results are worse than expected due to weaker than anticipated income performance and a further material PPI,”

said ShoreCap analyst Gary Greenwood.

Barclays completes restructuring

Commenting on the bank’s recent decisions, Chief executive Jes Staley said that the business is now “radically simplified”.

Barclays chief executive Jes Staley said:

“Our business is now radically simplified, the restructuring is complete, our capital ratio is within our end-state target range, and, while we are also working to put conduct issues behind us, we can now focus on what matters most to our shareholders: improving group returns.”

Mr Staley said Barclays had completed “two critically important planks” of its strategy to get out of unwanted businesses.

Chief executive Jes Staley said the restructuring of the business is now complete after selling down its non-core businesses to below its target of £25bn.

“We have accordingly established a new target today which is to achieve a greater than 10% group return on tangible equity over time.”

Meanwhile, Barclays is also under investigations for alleged misconduct. The charges are being investigated by the Financial Conduct Authority and the Prudential Conduct Authority. However, the bank said that it is fully cooperating with the authorities. The allegations on the bank include attempts to find the identity of a whistle blower as well as its involvement in manipulating the London interbank offered rate (Libor) and euro interbank offered rate (Euribor).

“Barclays Bank plc. continues to respond to requests for information from the Serious Fraud Office in relation to its ongoing Libor investigation, including in respect of Barclays Bank plc.,” the group said. The investigation by the prosecutor’s office in Trani, Italy also remains pending.”

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Paul

The author Paul