Shares in Barclays slid yesterday despite surging half-year profits as it warned of thinner earnings as customers respond to higher mortgage rates.
It posted a £4.6billion profit for the first half of the year, 22 per cent up on the same period a year ago.
Shares fell 5.3 per cent, or 8.66p to 155.4p. Barclays, like other banks, has been benefiting from rising interest rates, profiting from the difference between the rates they charge to borrowers and those paid out to savers – called the net interest margin.
Its net interest margin rose sharply from 2.67 per cent in the first half of last year to 3.2 per cent this year, and is now expected to fall to 3.15 per cent for the second half.
That is because many customers facing surging mortgage bills when they switch to more expensive deals are choosing to overpay to reduce those bills.
Sign of the times: Many customers facing surging mortgage bills when they switch to more expensive deals are choosing to overpay to reduce those bills
Finance director Anna Cross said that ‘the facts have changed’ since previous profit margin guidance was issued – base rates are 5 per cent, inflation is persistently higher and mortgage rates are higher.
Barclays also set aside £896m against the risk of loans turning sour. Cross said there was ‘not a huge amount of growth’ in the mortgage market but it was ‘extremely active’ as borrowers scramble to remortgage.
Barclays’ investment bank’s profits fell 10 per cent amid a continued slump in global deal-making.
Smaller rival TSB also reported rising profits – up 44 per cent to £147.9m – amid higher rates while at the same time revealing lower demand for loans.
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