Banking giant Barclays saw a 33% drop in profits to £2.6bn in the first half of the year as the payment protection insurance scandal took its toll.

The group, one of Britain’s top five banks, set aside £1 billion in the six months to June 30 to cover compensation for customers who were mis-sold PPI.

But stripping out the PPI provision, Barclays would have seen profits increase 24% to £3.7bn in the period - ahead of City expectations.

The figures are the latest in a week of half-year banking results, which started yesterday with HSBC revealing a better-than-expected 3% increase in pre-tax profits to US$11.5bn(£7bn).