Barclays’ profits fall 17% after £2bn misselling provisions

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Barclays’ pre-tax profits fell 17 per cent to £3.6bn for the first six months of 2013 as it made an extra £2bn provision to cover payment protection insurance and interest rate swap misselling.

In its half-year results, published today, the bank set aside £1.35bn for PPI misselling and £650m for interest rate swap misselling, bringing its total claims pot to £5.45bn.

Barclays says almost £3bn of the provision remains unspent and the monthly rate of PPI claims has slowed by 46 per cent since the peak of May 2012 but not as fast as expected.

Profits before tax fell from £4.3bn in the first half of 2012. Its wealth and investment management arm saw pre-tax profits half from £99m in the first half of last year to just £47m this year.

Barclays unveiled plans to partially plug a £12.8bn capital hole through a £5.8bn rights issue by June 2014 as agreed with the Prudential Regulation Authority earlier this year. 

It will use a combination of the rights issue to shareholders, reduction of its leverage exposure, issuance of additional tier 1 securities and the retention of earnings and other forms of capital accretion. 

The rights issue will give existing shareholders the chance to buy shares first so their stakes are not diluted.

Chief executive Antony Jenkins has previously said the bank would have to cut lending to meet its targets as business secretary Vince Cable hit out at the Bank of England’s “capital Taliban” for harming growth.

Group finance director Chris Lucas says: “The resulting provision represents Barclays’ best estimate of all future expected costs of PPI redress. However, it is possible the eventual outcome may differ from the current estimate and if this were to be material a further provision will be made, otherwise any residual costs will be handled as part of normal operations.”