Barclays prepares for potential fine of £2bn

Barclays has set aside another £800m (€1.1bn) to cover potential settlements for alleged foreign exchange manipulation, hitting profits and reflecting its struggle to put past problems behind it.

Barclays said, yesterday, it had now set aside £2.05bn to cover any settlement, but offered only limited clues on how soon a deal might come. US and British authorities are investigating the allegations. Barclays pulled out of a settlement between some authorities and six rival banks in November because it had not reached a deal with New York’s regulator.

“That (extra provision) reflects the further discussions we’ve been having with a number of regulators and agencies around the world across multiple jurisdictions,” finance director Tushar Morzaria told reporters.

Barclays wanted to settle the allegations with as many agencies as possible in one go and Mr Morzaria said the bank did not regret pulling out of the earlier settlement. New York’s banking regulator has said it could reach a deal with Barclays next month if it excluded a probe of the possible rigging of rates through computer programmes. It could take several more months if that trading is included.

Barclays could settle next month with a host of regulators, and leave any settlement with New York’s regulator, on computer trading, until a later date. Barclays also set aside another £150m for compensating customer mis-sold insurance products in Britain, which has now cost Barclays £5.4bn and all British banks more than £26bn.

Britain’s four biggest banks have paid out £42bn in charges related to misconduct in the past five years, and face paying out another £19bn over the next two years, Standard & Poor’s said this week.

Under chief executive Antony Jenkins, Barclays has abandoned its ambition of being a Wall Street powerhouse, shrinking its investment bank in favour of a return to its retail roots. He is cutting 19,000 jobs and shedding unwanted assets and businesses to cut costs and improve returns and its capital strength.

However, the cost of settling past misconduct issues continues to dog Barclays’ attempt to turn itself around. The bank reported a statutory first quarter pre-tax profit of £1.3bn, yesterday, down 26% from a year ago.

Its underlying pre-tax profit, stripping out the provision and other one-off items, was £1.8bn, up 9% from a year ago and just above the average forecast from analysts polled by the company. Return on equity, a key measure of profitability, was 10.9% for the core business, as earnings from personal and corporate banking rose 14% and underlying costs fell 7%.

The investment bank’s profits rose 37%, on the year, to £675m, as revenues rose 2% percent to £2.2bn, in line with analysts’ expectations and echoing a strong performance by its US rivals.

Reuters