Barclays profits fall, hit by £1bn PPI bill

• Barclays profits down 33% to £2.6bn • 3,000 jobs to go this year • £2.3bn of profit came from Barclays Capital • Bob Diamond calls for regulatory clarity Barclays is preparing to cut 3,000 jobs during 2011, its chief executive admitted on Tuesday, as the bank suffered a 33% slump in first-half profits, dented by a £1bn provision for customers mis-sold payment protection insurance . The £2.6bn of pre-tax profits was slightly higher than the City had been expecting and continued to be driven by Barclays Capital, the investment bank. Bob Diamond, who took the helm at the start of the year to replace John Varley , said that the headcount had fallen 1,400 so far this year and that job cuts would accelerate in the second part of the year. He indicated that around 3,000 cuts were likely across the 155,000-strong workforce. HSBC on Monday admitted that it expected to make 30,000 job cuts over the next three years . Even though profits at BarCap are down from £3.4bn a year ago as a result of the turmoil in the financial markets caused by the eurozone and the US debt crisis, the division still generated £2.3bn of the total £2.6bn of profits. Diamond called for clarity on the wave of new regulations that the banking industry is braced for once Britain’s Independent Commission on Banking reports on 12 September. “A final regulatory outcome will provide a clearer backdrop against which we can judge how much we continue to invest in our business and in the broader promotion of economic growth, versus how much we retain in higher levels of capital, or distribute to shareholders by way of a dividend. Our current dividend policy in the meantime must remain conservative though we are mindful of the importance of progressive, and affordable, increases,” Diamond said. “We look forward to certainty post-12 September.” Shares in Barclays rose more than 2% in early trading, up 4.25p to 221.5p. The profits were helped by a 41% fall in the impairment charge and other credit provisions to £1.8bn but knocked by a previously announced £1bn provision for compensating customers mis-sold payment protection insurance. “It has clearly been a very difficult operating environment,” said Diamond. The chief executive has embarked on a cost-cutting programme to help the bank generate a return on equity of 13% by 2013. The former head of BarCap, he is edging towards that goal, reaching 9.1% in the first half from 6.9% a year earlier. The first-half figures showed that the Barclays Corporate arm will be hit by a £47m loss because of a £64m charge taken in anticipation of the sale of its Russian business . The bank also said it was meeting its targets under the Project Merlin deal with the government over lending to small businesses. “We are meeting our Project Merlin commitments and have extended £20bn of new lending to businesses in the UK in the first half. We are on track to lend at least £40bn for the year,” Diamond said. He added: “Our capital, liquidity and funding position is rock solid. We look forward to the finalisation of new banking regulations over the coming months. This will help us balance requirements to hold more capital and liquidity on the one hand, with the desire of shareholders for us to distribute higher dividends and with business demand for us to help support economic growth, on the other,” he said. The bank is paying a 1p dividend for the second quarter, as expected, taking the half year dividend to 2p. Barclays had reported first half profits of £3.9bn a year ago . Some £3.4bn of the total was generated by BarCap, which reported a trebling in profits over the period. It stressed that its crucial core Tier 1 ratio – a measure of its financial strength – has now doubled from 5.6% since the end of 2008 to 11%. Barclays Banking Project Merlin Bob Diamond Jill Treanor guardian.co.uk

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