Barclays made provisions of £3.7bn in the first half of the year to cover possible loan losses as the coronavirus crisis took its toll on consumers and businesses.
The bank’s latest financial results showed it set aside £1.6bn to cover bad debts during the second quarter – the three months to the end of June – as the lockdown in its core UK market came into full effect.
The credit impairment charges and loan loss provisions came in about £200m above the expectations of analysts.
They dented group profit before tax for the six months, which fell to £1.3bn compared to the £3bn achieved in the same period last year.
The bank’s chief executive said its diversified business model – a key part of his strategy – had allowed Barclays to support its customers throughout the COVID-19 pandemic as income from its investment bank in particular offset weaknesses elsewhere.
The bank said: “Our consumer business income decreased by 11% in Barclays UK and 21% in CC&P (consumer, cards and payments) as a result of the lower interest rate environment, fewer interest earning balances, reduced payments activity and action to provide support for customers”.
That action, Barclays said, included more than 600,000 payment holidays up to 22 July and delivery of the government’s loan schemes to support businesses through the crisis.
The bank said that since late March, it had helped deliver around £22bn of funding including 250,000 government-backed Bounce Back Loans totalling around £7.7bn.
It said it had handed out £2.5bn under the Coronavirus Business Interruption Loan Scheme (CBILS), under which the bank shares some of the risk.
Barclays’ investment bank income rose 31% over the six months to £6.9bn – led by its markets business.
However, it confirmed there would be no interim dividend for shareholders.
Chief executive Jes Staley told investors a previously flagged boost to its reserves meant Barclays was in good shape despite the current challenges.
“Our CET1 (common equity tier one ratio) stands at 14.2% which underscores the strength of our balance sheet”.
But he added: “Although we will remain well capitalised and ahead of our minimum requirements, we may experience stronger capital headwinds in the second half of the year. The Board will decide on future dividends and capital returns at the year-end 2020.
“While the remainder of 2020 will be challenging, our diversified model means we can remain financially resilient and continue to support our customers and clients.”
Shares, down by more than a third in the year to date, rose initially before falling 1% in early trading.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said of the bank’s charges: “Given the backdrop, a large increase in provisions for bad loans during the half was to be expected – and Barclays now expects disruption to drag well past 2020.
“For the high street business bad loan provisions are clustered in the credit card business, always a riskier area for lenders, but the bank also anticipates some large losses from its large corporate customers.”