Barclays faces foreign exchange fixing probe

Tim Wallace
Follow Tim

BARCLAYS yesterday joined the list of banks dragged into an international investigation into alleged efforts to manipulate foreign exchange benchmarks.

The probe was revealed as the bank posted a fall in profits, driven by poor trading revenue and the costs of its streamlining plans. Underlying profits fell 26 per cent on the year to £1.39bn in the third quarter.

The biggest blow came from investment banking, where profits halved from £988m to £463m. The bank’s Transform programme, which closes down less profitable units and those that may harm its reputation, cost another £101m in the third quarter.

Much of those costs are redundancy payouts. Over the first nine months Transform costs came to £741m, of which £357m came in the European arm which is being cut back.

But some areas of the business increased incomes. Profits in the African retail and business bank increased from £34m in the third quarter of 2012 to £132m in the same period of 2013, and corporate bank profits soared from £88m to £276m.

The improving economy helped improve credit impairment charges by six per cent to £2.35bn.

Regulators announced the foreign exchange probe earlier this month, and Barclays confirmed it is helping with the investigation. But the bank did not set aside funds to cover the likely cost of the investigation, saying it is too soon to predict any costs. The probe joins the other investigations into the bank, including a European probe into interest rate benchmarks and a UK and US investigation into swaps benchmark ISDAFix.

But despite the legacy problems, chief executive Antony Jenkins said the bank is in a strong position to grow, in part because of its £5.8bn rights issue a month ago.

“Execution of the plan to met the Prudential Regulation Authority’s leverage expectation of three per cent by June 2014 is on track,” he said.

“We continue to reassess the balance sheet for further leverage reduction opportunities consistent with preserving our strong franchises, supporting lending to the UK economy and meeting the Transform programme targets.”

The results were better than feared and Barclays’ shares rose 0.9 per cent.