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By Hamza Ali
Barclays has seen its effective tax rate increase by a third, to 44.4 percent, during the first half of the year, due to increased penalties, fines and legal fees, the company announced Aug. 2 in its latest earnings report.
The U.K.-headquartered bank added 11.2 percentage points to its 2017 effective tax rate, partly due to the higher litigation and conduct fines that can’t be written off as losses for tax purposes, according to the bank.
Barclays’ effective tax rate, or the amount of tax it will pay after exemptions, has been an unexpected casualty in a year that has seen the bank pay $2 billion to settle a U.S. Justice department legal battle over whether it improperly sold mortgage-backed securities that fueled the financial crisis in 2007.
Meanwhile, these unscheduled charges and legal fees meant pretax profit at the high street bank also fell 35 percent, to 1.66 billion pounds ($2.2 billion) from 2.3 billion pounds. Profit before tax without the charges would stand at 3.7 billion pounds.
“It was the first quarter for some time with no significant litigation or conduct charges, restructuring costs, or other exceptional expenses which hit our profitability,” said Barclays CEO Jeff Staley in a statement.
“This first half performance shows a bank beginning to demonstrate its true potential and value,” he said. “The numbers we have posted strengthen our confidence that Barclays can deliver attractive and sustainable profits, and in our ability to return a greater proportion of those profits to shareholders over time.”
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