Repayments for mis-sold payments protection
insurance (PPI) have dragged down Barclays’ half year earnings.

Barclays’ pre-tax profit from retail and
business banking across the group fell by 63% on the first half of
last year to £446m ($726m) after Barclays had to pay the full
amount of the £1bn it had set aside as an estimate to cover PPI
re-imbursements.

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Sixty percent of the PPI provisions related to
the UK Barclayscard division; the remainder related to the retail
and business banking unit.

In the UK, pre-tax profit from the retail and
business banking division – including a £400m provision for PPI
repayments – fell by 40% on the year-ago period to £304m.

At group level, net profit from the retail
banking-focused division fell by a third (32%) year-on-year to
£1.98bn.

Pre-tax profit from the division also fell by
a third to £2.64bn.

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Net interest income from retail and business
banking rose by 3.6% year-on-year to £6.2bn, while net fee and
commission income increased by 5.36% to £4.42bn.

But chief executive Bob Diamond was 
undeterred by the impact on the PPI repayments, saying that the
bank’s capital liquidity and funding position was “rock solid” and
that he was looking forward to new banking regulation in light of
the upcoming proposals by the UK’s Independent Commission on
Banking, an independent government-appointed advisory panel.

 

             
Scroll down to read the retail banking results of different
business units

 

Europeretail and
banking division

Barclays’ pre-tax income from its European
retail and banking division made a loss of £161m in the six months
to end-June, compared with a £10m pre-tax income a year-ago.

Although the pre-tax loss also reflected the
bank’s retreat from Russia and Spain, the bank nonetheless recorded
an 11.7% increase in customer deposits from Europe to £19.1bn.

The bank had 9 more branches than it did at
the end of June last year, totalling 1,120 units; but has made no
more branch openings since the end of year.

Net interest income in the division improved
by 6.8% to £358m and net fee and commission income rose by 2.3% to
£219m.

But the total number of customers remained
unchanged at 2.7m.

 

Retail banking income from the
UK

Despite the fall in pre-tax income from the UK
retail and business banking division, the unit registered some
positive year-on-year growth across key metrics, including:

Although branch numbers declined by 40 units
to 1,634 on the first half of 2010, the retail and business banking
unit nonetheless registered some positive year-on-year growth in
the number of consumer accounts:

  • a 2.6% rise in the number of UK current
    accounts to 11.7m;
  • a 6.l4% rise in the number of UK savings
    accounts to 15m;
  • and even UK mortgage accounts rose slightly,
    by 1.3% to 925,000;
  • total assets in the retail and business
    banking division increased by 3.7% to £123.7bn.

UK customer deposits rose by 1.9% over the
year-ago period to £108.3bn, but have actually fallen by £1m since
the end of December.

 

Africa retail and
business banking

Africa retail and business banking was the
Barclays’ strongest business unit, with a pre-tax profit for the
six months to end-June of £379m, down by just 2.3% on the year ago
period.

Key metrics included:

  • Customer deposits increased by 15.6% to
    £13.8bn year-on-year;
  • Total retail banking-related assets rose by
    4% to £57.1bn;
  • Customer numbers increased by 3.6% to
    14.5m.

Although branch numbers fell by 22 units to
1,317 units from a year-ago, the bank increased its ATM
distribution network by 366 units to 9,816.

 

Barclaycard

The PPI repayments dealt a major blow to the
bank’s card division, which accumulated a pre-tax loss of £76m,
compared with a pre-tax profit of £317m a year ago.

Yet, other key metrics were, in relative
terms, healthier:

Net interest income remained static at
£1.37bn, as did net income from fees and commission with £571m.

The number of UK card customers rose by 8.1%
to 12m, but internationally, card customer numbers declined by
almost 3% to 10.2m.

Average outstanding balances on UK Barclaycard
cards were 9% higher on the year ago period at £12bn, but again
declined internationally by just over 6% year-on-year to
£9.2bn.

 

Provisions for PPI repayments are expected to
deal a major blow for all the big UK banks.

Santander kicked off the UK half year
reporting season on 27 July. HSBC reported its results on 1
August.

Lloyds Banking Group and Royal Bank of
Scotland are all due to report by 5 August.