Steve Slater and Matt Scuffham London
Barclays, rocked by an interest rate rigging scandal, yesterday unveiled new US regulatory investigations into the bank’s financial probity and said its profit was hit by charges for mis-selling insurance.
Its shares fell almost 5 percent, hurt by a weaker performance in investment banking than most of its Wall Street rivals and fears that legal problems would handicap its new chief executive’s efforts to overhaul the company.
After investigations in the UK over dealings with Qatari investors, Barclays said the Department of Justice and Securities and Exchange Commission were probing whether its relationships with parties who helped it win or retain business were compliant with US laws.
The bank is under investigation by Britain’s financial regulator and fraud prosecutor into payments to Qatari investors after it raised billions of pounds from the Gulf state five years ago to save it from taking a taxpayer bailout.
Barclays revealed the Financial Services Authority investigation in July and confirmed the Serious Fraud Office had launched a probe the following month.
Barclays also said the US Federal Energy Regulatory Commission (FERC) could be close to fining it over an investigation into the manipulation of power prices in the western US from late 2006 until 2008.
FERC could notify the bank of proposed penalties as early as yesterday, and Barclays said it would “vigorously” defend this matter. The investigation was first announced in April, alleging the bank took substantial electricity market positions to move daily index settlements.
In March, it fined Constellation Energy a record $245 million (R2.1 billion) over power market manipulation activities as part of a fresh crackdown on power market rigging.
New Barclays chief executive Antony Jenkins, who took over at the end of July when his predecessor Bob Diamond quit after the bank admitted rigging London interbank offered rate (Libor), is in the midst of a review to change culture and lift profitability, due to be unveiled in February.
Investors have made it clear they wanted a return on equity above the cost of equity, higher dividends and for pay to be cut. That is expected to mean the investment bank arm will be significantly cut back.
“While we have much to do to restore trust among stakeholders, our universal banking franchise remains strong and well-positioned,” he said.
The bank had fired staff, clawed back pay and taken other disciplinary action after a “very rigorous” internal investigation into the Libor manipulation, Jenkins said. He declined to provide more specific details on how many staff it had taken action against.
Barclays was fined $450m by US and UK regulators for the rate rigging.
The bank said its adjusted pretax profit in the three months to September was £1.73bn (R24bn), in line with analysts’ forecasts and up from £1.34bn a year ago.
But a £700m charge for mis-selling payment protection insurance pulled pretax profit down 23 percent to £1.03bn, and a £1.1bn loss on the value of its own debt dragged it to a loss of £47m for the quarter.
Investment bank income was £2.6bn in the quarter, up 17 percent on the same period the previous year, but down 13 percent on a strong performance in the second quarter.
The bank said performance this month had been affected by the “challenging economic environment and subdued market volumes”.
Barclays shares were down 3.9 percent at £2.29 at 11.14am, while the European bank index was up 0.3 percent. – Reuters