CS Venkatakrishnan, the chief executive of Barclays, has voiced opposition to proposals for a windfall tax on banks, asserting that such a measure would negatively impact lending and overall economic growth. His comments come in the wake of the bank reporting substantial half-year profits and increasing the bonus pool for its traders.
Prime Minister Andy Burnham has been advocating for increased public spending on defense, social care, and cost-of-living support, with a windfall tax on lenders being considered as a potential funding source. Banks, including Barclays, already contribute to corporate taxes, with a 3 percent surcharge on top of the standard 25 percent corporation tax rate.
Venkatakrishnan emphasized the role of banks in the economy, stating, "for every £1 of capital we have, we lend £8 to £10" to businesses and households, which in turn supports economic expansion. He added that a growing economy benefits everyone.
Barclays' recent financial performance was bolstered by market volatility and higher mortgage rates. The bank's profits surged by 17 percent to £6.1 billion in the first half of the year. Concurrently, the allocation for its bonus pool rose from £1 billion to £1.3 billion, with a shift towards a performance-based pay structure for top traders. The bank also announced a doubled dividend and a £1 billion share buyback program.
The robust profits have intensified calls from groups like the Trades Union Congress (TUC) for banks to contribute more tax revenue. The TUC suggests that reinstating the bank surcharge to 8 percent, from its reduced 2023 level, could generate approximately £9 billion over the next four years. TUC general secretary Paul Nowak argued that while big banks are experiencing significant profits, working people and local businesses are facing financial difficulties, and high interest rates, while beneficial for banks, have led to increased mortgage costs and bills for consumers.
Barclays reported it is on track to lend £30 billion into the economy this year, following a 5 percent loan growth in the first half. The bank's net interest income, a key profitability metric reflecting the difference between interest paid on deposits and charged on loans, increased by 8 percent to £4 billion. This rise was partly attributed to sustained high interest rates and market volatility stemming from geopolitical events and trading in AI stocks, which also saw the equity trading division's income climb by 45 percent to £1.26 billion.
Despite the strong financial results, Barclays' share price saw a decline of 4.8 percent. Analysts noted mixed performance across the bank's divisions, with its investment bank being a strong performer while Barclays UK and its US consumer bank lagged behind expectations.