Barclays reported a 33% drop in half-year profits to 2.6 billion after it took a 1 billion hit to cover compensation for customers who were mis-sold payment protection insurance.

The hit comes after the High Court decided that new rules on the mis-selling of PPI could be applied retrospectively and the British Bankers' Association pulled an appeal against the decision.

It means banks must contact those they believe may have been mis-sold in the past.

Lloyds Banking Group made a provision of 3.2 billion, Royal Bank of Scotland set aside 850 million and HSBC earmarked 270 million.

Only last week, Santander revealed PPI mis-selling had cost it 540 million, taking its profits after tax and the PPI charge to 300 million (see the Santander 540 million news story).

However, Barclays's underlying performance stripping out the PPI provision revealed profit growth. Without it, Barclays would have seen profits increase 24% to 3.7 billion in the period.

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Barclays profits hit