Barclays PLC (LSE:BARC) raised its cost projections for 2022 after facing £1.3bn of litigation and conduct charges in the second quarter.
In its first half results today, Barclays said it expects to incur total operating expenses of £16.7bn in 2022, up from its previous guidance of £15bn.
It is targeting a return on tangible equity greater than 10% for the year after generating a return of 10.1% in the first half of the year.
Barclays posted a statutory pre-tax profit of £3.7bn for the first half of the year, 32% less than the £4.9bn it posted for the equivalent part of 2021.
Group income rose 10% year on year to £13.2bn in the first half. The bank said it had “strong income momentum” across all of its operating businesses.
Barclays UK benefited from higher interest rates and transaction-based revenues. Its consumer, cards and payments segment had an increase in payments transactions.
Barclays’ corporate and investment bank had client wallet market share gains.
However, costs during the period also surged to £9.1bn, up from £7.3bn in the first half of 2021.
Analysts say that an “over-issuance of securities in the US”, combined with an impairment provision, marred the bank’s overall figures.
Barclays has been forced to rescind US$17.6 billion of securities, meaning it must buy back debt notes it overissued above registered amounts in the US market at the original price.
Hargreaves Lansdown analysts estimated in March that the error would cost the bank approximately £450mln in extra charges.
“In all, the strength which business and geographical diversity gives to Barclays are still much in evidence, although the US securities error and the further debt provision have muddied the waters,” said Richard Hunter, head of markets at Interactive Investor.
AJ Bell investment director Russ Mould agreed that “Barclays’ numbers were scarred by further damage caused by the structured products debacle in the US”.
“Profit may have missed expectations, but earnings were slightly better and the company delivered big growth in the dividend, as well as unveiling a further share buyback which was larger than had been pencilled in by analysts,” he said.
“Barclays also stuck with a returns target of more than 10% both for this year and in the medium-term. For now investors may well be in ‘well I’ll believe it when I see it mode’ and the company can ill-afford any more mistakes in the short term.”