Barclays profit up 31% as TUC demands 35% bank surcharge

Barclays reported profit before tax of £3.3 billion for the second quarter on Tuesday, up 31 per cent, as the TUC called for the surcharge on banking profits to be raised to as much as 35 per cent.

The FTSE 100 lender said strong equities trading activity had helped lift quarterly profits. It also upgraded its guidance, telling investors it now expects group income of about £31.5 billion this year, having previously anticipated about £31 billion.

Paul Nowak, TUC general secretary, said: “Big banks like Barclays are raking it in while working people and local businesses are struggling. This is a chance for the new prime minister and chancellor to show whose side they’re on. It’s time to increase the bank surcharge and tax banks to bring down energy bills.”

The surcharge is levied on bank profits on top of corporation tax. HMRC set the rate at 3 per cent from 1 April 2023, down from 8 per cent, and raised the banking group allowance to £100 million. Business Matters reported in October that the Treasury was examining restoring the surcharge to 8 per cent, a move expected to raise about £2 billion a year.

Speaking on a media call with journalists, CS Venkatakrishnan, the Barclays chief executive known as Venkat, pushed back on suggestions that banks could be a target for more taxes under Andy Burnham’s government, saying the sector already pays “the highest rate of tax globally”.

He added: “We think that the track record that we and the other banks have in terms of supporting UK growth and UK lending… is really important for the health of the economy, and we hope that will be considered.”

Barclays is the first of three major UK banks to report first-half earnings since Burnham appointed John Healey as chancellor on 20 July.

Group income rose 16 per cent to £8.3 billion over the second quarter, beating City estimates. Over the first half, income rose 11 per cent to £16.5 billion, with profit before tax up 17 per cent to £6.1 billion.

The investment bank reported profit before tax up 32 per cent to £1.7 billion over the quarter, with income from equities trading up 45 per cent. The results follow record profits at Wall Street banking giants, where traders capitalised on volatility in financial markets.

Corporate banking income rose 8 per cent to £1 billion over the half year and profit before tax rose 30 per cent to £566 million. In retail banking, net interest income, the difference between what the bank charges borrowers and what it pays savers, rose 8 per cent to £4.5 billion, with profit before tax up 10 per cent to £1.8 billion. Private banking and wealth income rose 2 per cent to £713 million, while profit before tax fell 21 per cent to £186 million.

The bank increased its provisioning for loan losses to £1.4 billion, up from £1.1 billion, which it said was “primarily driven” by the funding set aside to handle the collapse of Market Financial Solutions, the Mayfair-based provider of mortgages and bridging finance that collapsed amid allegations of fraud.

Barclays also launched a £1 billion share buyback and increased the interim dividend to 5.9p a share, up from 3p a share in the same half last year. The three-year targets it set out in February include about £2 billion of cost savings and more than £15 billion of capital returns by the end of 2028.

Shares in Barclays fell 5 per cent, or 27¼p, to 503p. The stock has risen nearly 40 per cent over the past year. Some analysts said the investment bank’s performance had lagged Wall Street rivals, which saw equities trading boosted by SpaceX’s initial public offering.

Gary Greenwood, investment analyst at Shore Capital, said the shares had had a strong run-up to the results and “expectations had got ahead of themselves”. He said the investment bank had been “the standout performer” and that the group’s corporate banking services had “more than offset softer consumer trends”.

Jamie Young

Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk