Barclays: Shares climb despite profit slide

Profits at high-street lender Barclays slipped over 20% in the first half as the group suffered from loss-making non-core businesses and set aside a larger PPI provision. New boss James Staley is convinced this supports his new UK and US-focussed strategy and is refusing to budge after the Brexit result.

Reeling from a £1.9 billion loss in its non-core operations, profits at Barclays slipped by over a fifth to £2 billion in the six months to 30 June. The high-street bank put aside another £400 million for mis-sold payment protection insurance (PPI), with the scandal now costing the bank £7.8 billion - but lower than the £16 billion paid by Lloyds since 2011.

Back in March, new boss Staley cut Barclays' dividend and set out plans to focus on the US by selling its business in Africa. The group sold 12.2% of its stake in the business, and now holds 50.1% of the African arm. It has also completed the sale of its Portugal banking division. Elsewhere, Barclays is in discussions with AnaCap Financial Partners over the sale of its French group, which lost £372 million in the first half.

An interim dividend of 1p per share will be paid out in September.

The £1.9 billion loss in non-core operations wiped out a chunk of the £3.97 billion profit earned from its core businesses, which itself was boost by the £615 million sale of its stake in Visa Europe to Visa. The divisions are doing well, operating with a 12.5% return on tangible equity (RoTe) - 120 basis points higher than this time last year on a tangible equity base of £40 billion.

Across the group, tangible shareholder equity was 4.8% and basic earnings per share was 6.9p, 30% lower than this time last year. Cost-cutting schemes and lower compensation charges pulled core operating expenses down 10% to £6.7 billion although this was partially offset by foreign exchange headwinds.

It's going to get increasingly hard for banks to make money from interestTotal income fell 9% to £11 billion net of insurance claims, with the £586 million loss in non-core income denting the £11.6 billion core turnover. Net interest income stayed flat at £2.98 billion.

With many expecting UK interest rates to be cut further next month, it's going to get increasingly hard for banks to make money from interest. Rising operating expenses pulled pre-tax profit down 10% to £2.3 billion in its Corporate & International division and profit at Barclays UK slipped 4% to £1.3 billion due to regulation fees.

Barclays' leverage ratio has fallen 30 basis points to 4.2% since December 2015: its leverage exposure jumped 12% to £1.2 billion - including an increase in loans and advances to £718 billion - and total assets climbed 21% higher to £1.4 billion.

With a £1.6 billion increase in core equity tier 1 capital to £42.2 billion, risk weighted assets jumped £8 billion to £366 billion. Its CET1 ratio - a measure of financial strength - is now 20 basis points higher at 11.6%.

A boost to profits has increased tangible net asset value per share to 289p from 275p in December 2015.

Barclays shares jumped 7% to 156p on Friday, reaching a one-month high. After slipping 20% in response to the UK's referendum result, Barclays has broken through the negative trend-line established a year ago, and is now using this level as support.

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