Barclays resumes dividends as H1 profits smash estimates

UK bank Barclays on Wednesday smashed first-half profit estimates as it released £742m in impairments, resumed dividends and announced a £500m share buyback.

The company reported pre-tax profit of £5bn for the six months to June 30, well above the consensus forecast of £4.1bn, and up from £1.3bn a year ago. Barclays in 2020 made a £3.7bn provision for bad debts.

Group income of £11.3bn was down 3% reflecting currency headwinds while the Common equity tier 1 ratio, a measure of financial strength, came in at 15.1%, in line with December 2020.

Profits were driven by Barclays' investment banking unit, where first half fees soared 27% to £1.7bn on the back of merger & acquisition deals and stock market flotations.

Equities income also increased 38% to £1.7bn, offsetting a 37% fall in revenues from trading bonds, currencies and commodities.

“We have reported robust revenues and profitability, and I am optimistic about our prospects to grow our business further. Our investment banking fees and equities businesses have delivered record income, and we are seeing encouraging signs of recovery in consumer banking,” said chief executive Jess Staley.

Shareholders will get an interim dividend of 2p a share after the Bank of England in July gave the go-ahead for payouts to resume.

Barclays will buy back £500m of its own shares, as impairments were expected to stay below historical levels due to an improved economic outlook and low default rates on unsecured lending.

Second quarter pre-tax profits came in at £2.6bn on revenues of £5.4bn. Analysts had forecast profit of £1.7bn on net income of £5.3bn for the period.

Barclays also warned that its total costs would be up this year because of a real estate charge and higher staff bonuses. The cost-income ratio in the first half was 64%, well above its target of below 60%.

The consumer, cards and payment unit saw a decline of 4% in income as customers saved cash during the pandemic and paid down credit card debts.