In the second quarter to end-June the FTSE 100 lender's UK business and credit cards arms both sank into losses as bad loan provisions were increased by £1.6bn to £3.7bn.
Excluding provisions, underlying pre-tax profits for the half-year were up 27% to £5.0bn, with headline profit before tax of £1.3bn down 58% year on year.
Income rose 8% to £11.6bn for the half-year, despite the net interest margin shrinking to 2.69% from 2.9% in the first quarter, but total costs decreased by 4% to £6.6bn.
The investment bank was the main engine of growth in the period, with income surging 31% to £6.9bn as the markets business made hay.
But there was a 21% decline in consumer, cards and payments income, which led to an 11% drop in the UK business and 16% in international, as lower interest rates combined with customer support actions and the removal of certain fees due to the coronavirus, including giving around 600,000 payment holidays to customers.
Capital levels remained strong in the half, with a common equity tier 1 (CET1) ratio of 14.2%, up from 13.8% in December.
Barclays said it expects income to gradually recover, though low-interest rates are likely to persist well into next year.
Impairments in the second half of the year are expected to remain “above the level experienced in recent years”, but below those in the first half, “assuming no change in macroeconomic forecasts”.
Having been pressured to ditch its dividend and suspend share buybacks earlier in the year, following pressure from the Bank of England, the board said it will decide on future dividends and its capital returns policy at the end of the year.
Barclays shares fell more than 4% to 106.92p in early trading on Wednesday.
Richard Hunter, head of markets at Interactive Investor, said: “With the banks being popularly regarded as the culprits of the Great Financial Crisis over a decade ago, the current economic and market downturn has provided the opportunity for the banks to be at the vanguard of helping the recovery.
“Indeed, in a theme likely to be repeated throughout this half-yearly reporting season, Barclays has provided Covid-19 related support of around £22bn for UK businesses, with 600,000 payment holidays and access to credit and finance where necessary for individuals and large corporates alike."
He said decline of 58% in profits was accompanied by some noticeably weaker metrics, such return on tangible equity slumping to 2.9% from a previous 9.1%.
“In addition, the outlook for the second half of the year is notably cautious, not least of which due to the dependence on a strong recovery in developed economies such as the US and the UK, where unemployment remains a major concern. Tepid GDP growth will put further pressure on individuals and businesses trying to recoup some of the losses incurred during the pandemic and in any event, the likelihood is that interest rates will continue to remain at historic lows, putting margins in something of a straitjacket.”
--Adds shares and broker comment--