Barclays' soaring Q2 profits fail to offset H1 loss

The loss is largely due to conduct and litigation costs incurred in the first quarter, which totalled £2 billion across the first six months of 2018.

Those charges relate mainly to a settlement with the US Department of Justice over mortgage backed securities, as well as £400 million of PPI costs.

Excluding litigation and conduct charges, profit before tax rose 20% to £3,701 million, as operating expenses fell by 5%.

In Q2, income rose 10% to £5.6 billion and pre-tax profits increased by 44% to £2 billion, helped by the decline in conduct and litigation costs in the quarter which were £81 million compared to £715 million in 2017.

Jes Staley, Group CEO said: "It was the first quarter for some time with no significant litigation or conduct charges, restructuring costs, or other exceptional expenses which hit our profitability. In effect then, it is the first clear sight of the statutory performance of the business which we have re-engineered over the past two and a half years – Barclays’ transatlantic consumer and wholesale bank – and it is a positive sight.

"This first half performance shows a bank beginning to demonstrate its true potential and value. The numbers we have posted strengthen our confidence that Barclays can deliver attractive and sustainable profits, and in our ability to return a greater proportion of those profits to shareholders over time."

Laith Khalaf, senior analyst at Hargreaves Lansdown, commented: "Barclays is moving in the right direction, but the champagne needs to be put on ice until the bank can deliver some consistency in its performance.

"The investment bank has performed well, which is particularly impressive given that stronger sterling has dented the value of its US revenues when converted back into pounds and pence. Some of the improvement is down to falling bad loan provisions, thanks to upgraded forecasts for the US economy. While positive, that’s not something you can rely on to recur every quarter. However the investment bank’s equity division saw a big jump in revenues as its customers sought out derivatives, presumably to help navigate choppier markets.

"Barclays isn’t entirely out of the woods on litigation yet either. PPI claims have just over a year left to run and we wouldn’t be surprised to see some additional costs as consumers react to the deadline. Meanwhile the case against Barclays relating to Qatari investment in 2008 was dismissed by the Crown Court, but the SFO is now pursuing legal action in the High Court, so this could still prove a stumbling block for the bank."