Barclays Post H1 Results Setting Aside 1.6B EUR for Loan Losses

Barclays Post H1 2020 Results Setting Aside 1.6 Billion Euros for COVID-19 Induced Loan Losses

UTC by Benjamin Godfrey · 3 min read
Barclays Post H1 2020 Results Setting Aside 1.6 Billion Euros for COVID-19 Induced Loan Losses
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Barclays Plc has posted its H1 performance report showing revenue of £11.6 billion. The BARC stock is 37% down in 2020.

Britain’s noble bank Barclays Plc (LON: BARC) has posted slides containing its H1 2020 result which saw the bank posted a net profit of £695 million ($765.64 million). The COVID-19 pandemic significantly impacted the operations of the bank as Barclays set aside £1.6 billion to its credit impairment charges during the second quarter, bringing the total level to £3.7 billion at the end of the first half.

The bank has also been instrumental in helping the government deliver its relief packages to the masses over the past months that the coronavirus had been raging. Barclays CEO, Jes Stanley said in a statement:

“This has been a period focussed on supporting our customers, clients, and the UK economy through the COVID-19 pandemic – providing the people and businesses that we serve with a bridge to recovery in every way we can. Since late March, we have helped to deliver around £22bn of vitally important COVID-19 government support measures to UK businesses to help fund them, including c.250k government-backed Bounce Back Loans totalling c.£7.7bn, c.£2.5bn under the CBILS programmes and c.£11.7bn of commercial paper issuance.”

Barclays (BARC) stock has been down by about 37% since the start of 2020 and it is currently down BARC stock is 4.54% down now, trading at £106.80.

Barclays H1 Performance in Numbers

Barclays performance update showed that profit before tax was significantly decreased when compared to H1 2019 at £1,272m against £3,014m. Excluding litigation and conduct, profit before tax was £1,302m (H119: £3,128m), as positive operating leverage from an 8% increase in income and a 3% reduction in operating expenses was offset by materially higher credit impairment charges.

The reduction in business activities as a result of the COVID-19 situation also brought about a corresponding decrease in the group’s operating expense. Operating expenses decreased 3% to £6,563m reflecting cost efficiencies and continued cost discipline in the current environment and the Group accrued compensation costs reflective of business performance, resulting in a compensation: income ratio of 32.2% (H119: 34.4%).

Credit impairment charges increased to £3,738m (H119: £928m). This increase primarily reflects £591m in respect of single name wholesale loan charges and £2.4bn impact from revised IFRS 9 scenarios (the “COVID-19 scenarios”) reflecting forecast deterioration in macroeconomic variables (including a prolonged period of heightened UK and U.S. unemployment), partially offset by the estimated impact of the central bank, government and other support measures.

The group’s CET 1 ratio grew to 14.2%, from 13.1% at the end of the first quarter while total revenue grew from £10.7 billion in H1 2019 to £11.6 billion. As detailed in the group’s H2 projections, the current uncertain economic situation marred by low-interest rates, the group’s performance “is expected to continue to be challenging,” which is likely to extend to 2021. Moving forward, the firm hopes to adhere to strict cost discipline in its future operations.

Barclays Is Known for Wedging Through Crises

Barclays bank’s 326 years history can be tagged as that with utmost resilience in the face of crises. The 2008 global financial meltdown saw other top banks in Britain including Natwest Group PLC (LON: NWG) (formerly the Royal Bank of Scotland) and Lloyds Banking Group PLC (LON: LLOY) which both cringed in the heat of the crises. Barclays managed to wedge through the crises, a feat that later brought lawsuits.

Although the group’s performance was below expectations, the £11.6 billion profit recorded in the face of a massive economic downturn caused by the coronavirus pandemic has further given credence to the bank’s survival potential, a feature that investors cherish.

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