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* H1 profit falls to 1.3 bln pounds from 3 bln in H1 2019
* Struggling consumer unit outweighs strong trading
performance
* Bank warns headwinds to persist on capital and income
(Adds details)
By Lawrence White and Sinead Cruise
LONDON, July 29 (Reuters) - Barclays set aside a higher than
expected 1.6 billion pounds ($2.1 billion) to cover a possible
rise in loan losses in the second quarter and warned that a grim
outlook and low interest rates would hurt profits into 2021.
The COVID-19 pandemic has forced banks globally to set aside
billions to cover bad loans and the British bank's consumer
business is under pressure from lower interest rates, smaller
credit card balances and personal loan repayment holidays.
Barclays booked pre-tax profit for the first half of the
year of 1.3 billion pounds, down from 3 billion pounds a year
ago as provisions against potential bad debts outweighed
improved revenues from its investment bank.
Its shares were down 3.5% in early trade.
Barclays' trading performance was a bright spot as
virus-induced market volatility prompted a 60% jump in trading
revenues in foreign-exchange, rates and credit trading.
Overall, the markets division posted a 49% rise in revenue
to 2.1 billion pounds, an endorsement of the strategy adopted by
Chief Executive Jes Staley, who has championed the investment
banking business, contrary to the wishes of activist investor
and top shareholder Edward Bramson, who wants to shrink it to
slash costs.
Barclays was expected to report credit impairment charges
and loan loss provisions totalling 1.42 billion pounds for the
April-June period, according to an average of analyst forecasts
compiled by the bank.
That increase takes total provisions to 3.7 billion pounds
for the half-year and analysts predict that sum to rise to 5.79
billion pounds for the full year.
Barclays said impairments in the second half of the year
were unlikely to reach levels seen in the January-June period,
assuming no change in economic forecasts.
The bank also said it would see short-term pressure on
efforts to keep costs low, as it spends on various COVID-19
related initiatives.
Elsewhere in Europe, Spain's Santander reported a
record quarterly loss after booking a 12.6 billion euro hit in
the second quarter, the largest impairment charge yet for a
European bank in the pandemic.
Barclays' capital ratio came in at 14.2%, up from 13.1% at
the end of March as recent regulatory changes boosted its
reserves. Barclays flagged the capital boost earlier this month.
However, the bank warned its capital buffer could come under
pressure in the second half of the year.
($1 = 0.7740 pounds)
(Reporting By Lawrence White and Sinead Cruise, editing by Iain
Withers and Carmel Crimmins)
