The FTSE 100 bank posted a £1.2bn loss in the six months to 30 June 2017, as a £1.4bn write-down from the sale of its Africa operations and a £1.1bn impairment of its holding in said business ate into profits.
Like Lloyds, the bank was also subject to higher PPI charges, paying out £700m during the period.
Despite this, the bank increased its group profit before tax by 13% to £2.34m thanks to cost saving efforts from its non-core business, which was created in May 2014 to get rid of inessential assets and businesses.
The non-core business, which the bank successfully closed on 1 July 2017, saw a materially lower loss before tax of £647m versus £1.9bn the previous year, a 66% improvement.
However, Barclays’ core operations were less profitable, coming in 25% lower at £2.98bn from £3.97bn a year ago.
While chief executive James Staley hailed the group’s further gains in deconsolidating its Barclays Africa Group Limited and rundown of its non-core unit, “two critically important planks of our strategy,” analysts were left feeling “perplexed” by the update.
The market response on the day was equally confused. Barclays share price bounced around throughout the morning trading session, ending up 1.1% lower at 206.8p at the time of writing.
To Hargreaves Lansdown senior analyst Laith Khalaf, it appeared like “the bad bank is getting better, but the good bank is getting worse”.
“The sale of Barclays Africa and more PPI costs are the main culprits for the bank’s woes so far in 2017,” he noted, but “more litigation problems are waiting in the wings, with the bank in trouble with the FCA, the SFO and the US Department of Justice, a formidable triumvirate of adversaries.”
The size of Barclays’ pension deficit was also identified as a problem area.
Off the back of falling government bond yields, the “bank’s pension black hole has more than doubled in size since the last funding valuation”, Khalaf pointed out. Estimates suggest that over 10 years, that’s going to cost the bank an extra £4.5bn.
“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,” said Khalaf.
“Indeed, the bank appears to have got the pension trustees to agree to weighting payments towards the end of the 10-year period, presumably in the hope that rising gilt yields will make the problem go away by then.”
Still, “the pressure is on to perform”, he added.
Barclays did decide to maintain its interim dividend but there was no mention of further increases.
