30 Oct 2013

Barclays reviews foreign exchange trading as profits fall

Barclays is cooperating with regulators reviewing alleged manipulation of currency rates as it reports profits from its investment banking arm fell by half in the third quarter.

Britain’s third-biggest bank by stock market value said it was reviewing its foreign exchange trading over several years to August 2013.

The group reported total profit before tax for the period down by 26 per cent to £1.38bn compared to the same period last year – though statutory profits, when some accounting provisions are included, were up sharply.

Barclays said pre-tax profits from its investment bank dropped by 53 per cent to £463m.

Libor scandal

Lower activity was driven by uncertainty about when the US Federal Reserve would start slowing its quantitative easing programme that is pumping billions of dollars into the economy every month.

Profits from UK retail and business banking were 2 per cent down at £351m.

Meanwhile, the bank said that provision for mis-selling payment protection insurance remained unchanged.

It has £1.26bn left of a £3.95bn pot set aside to cover compensation schemes.

The latest investigation into rate-fixing comes after Barclays paid £290m in fines to US and UK regulators in June last year over the manipulation of Libor and Euribor interbank rates, in a scandal that claimed the scalp of chief executive Bob Diamond.

Read more: Has Barclays bank really turned over a new leaf?

New boss Antony Jenkins, appointed last summer, launched a crusade to overhaul the culture of the bank, with a major restructuring programme called Transform that has cost £741m so far this year.

But its reputation has taken further blows after it revealed it was facing a £50m fine over claims it acted recklessly in its multi-billion pound bailouts from Qatar in 2008.

In its latest trading update, the bank said: “Various regulatory and enforcement authorities have indicated they are investigating foreign exchange trading, including possible attempts to manipulate certain benchmark currency rates or engage in other activities that would benefit their trading positions.

“The investigations appear to involve multiple market participants in various countries.

“Barclays Bank has received enquiries from certain of these authorities related to their particular investigations, is reviewing its foreign exchange trading covering a several year period through August 2013 and is cooperating with the relevant authorities in their investigations.

“It is not possible at this stage for Barclays to predict the impact of these investigations on it.”

Global macro environment

Elsewhere in the report, Mr Jenkins said the group was “well-positioned to take advantage of improvements in the global macro environment”.

He said performance was resilient, but added: “I am not complacent, and my executive team know we must push harder in the final quarter into 2014.”

Last month, the bank received strong support for a £5.8bn rights issue offered as part of a plan to meet the City regulator’s demand that it plug a £12.8bn billion hole in its finances.

Mr Jenkins said in the latest update that plans to meet the demands by June 2014 were on track.

In its outlook statement, the bank said: “We continue to remain cautious about the environment in which we operate and our focus remains on costs, capital leverage and returns to drive sustainable performance improvements.”

Shares were up nearly 3 per cent.

Analysts at Credit Suisse said the results were ahead of consensus forecasts.