London - Barclays, the UK’s second-biggest bank by assets, said third-quarter profit unexpectedly rose, as it set aside £500 million (R8.8 billion) to cover the cost of settling a probe into currency rigging.
Adjusted pretax profit rose to £1.59bn from £1.39bn in the year-earlier period, the London-based bank said in a statement yesterday. Pretax profit in the investment bank dropped to £284m from £465m a year earlier.
Chief executive Antony Jenkins has set up a bad bank and cut thousands of jobs to make the lender more profitable since the Libor-rigging scandal cost his predecessor, Bob Diamond, his job in 2012.
While Jenkins pledged to overhaul the bank’s culture, his efforts have been overshadowed by probes into its dark pool and currency markets.
“These are good results,” Citigroup analysts said in a note.
“Barclays’s transition from investment banking towards retail banking continues, with the three retail divisions accounting for 80 percent of third- quarter core profitability.”
Shares fell 0.16 percent to 220.15 pence at 7.47am in London.
They have dropped about 17 percent this year, the second-worst performance among the five largest British lenders.
At 0.6, Barclays has the lowest price-to-book ratio, a measure of market price versus equity, among the largest five British lenders.
That compares with Royal Bank of Scotland’s (RBS) ratio of 0.7, HSBC at 1 and Standard Chartered at 0.8, data compiled by Bloomberg show.
Adjusted operating expenses were at £4.3bn, down from £4.4bn a year earlier, according to the statement.
The bank took a £170m provision to cover the costs of compensating clients for improperly sold payment protection insurance and made a loss of £364m on the sale of its Spanish business to CaixaBank last month.
Helping offset the currency-rigging charge, the bank made a £461m gain on US Lehman Brothers acquisition assets.
It also got a £160m provision release for interest-rate hedging product redress to customers.
Barclays is among banks including Citigroup, RBS and UBS in discussions with the UK’s Financial Conduct Authority (FCA) that may lead to a settlement of the regulator’s probe into currency rigging as soon as next month, according to people with knowledge of the matter.
UBS said on Tuesday it was in talks with US authorities about alleged foreign-exchange manipulation, while setting aside Sf1.84 billion (R21bn) for litigation provisions. Deutsche Bank, Germany’s largest lender, swung to a loss in the third quarter after setting aside e894m (R12.4bn) to cover the costs of settling probes.
Barclays could face as much as £1.2bn in conduct charges this year, said Chirantan Barua, an analyst at Bernstein.
His estimate includes a £700m charge to settle a foreign-exchange probe with regulators and a further £200m relating to a US investigation into its private-trading venue, known as a dark pool.
Jenkins has struggled to overhaul the bank’s culture, vowing a commitment to integrity amid a series of fines.
The bank was fined £26m in May by the FCA for control failings over its setting of gold prices and is also fighting allegations it misled customers of its dark pool.
As part of his revamp, Jenkins set up a bad bank, led by Eric Bommensath, to dispose of £115bn of assets including complex derivatives from the lender’s fixed-income, currencies and commodities unit and the European consumer arm.
Risk-weighted assets at Barclays’s non-core business fell £6.5bn to £81bn in the second quarter as the lender sold securities and businesses, including the United Arab Emirates retail banking portfolio.
The loss before tax at the unit narrowed to £157m in the third quarter from £292m a year earlier.
At the investment bank, income from equities trading fell 25 percent to £395m in the third quarter from a year earlier, while credit income slipped 17 percent to £255m.
Markets revenue which includes macro, credit and equities was £1.1bn, down from £1.3bn a year earlier, according to the statement.
Jenkins said the performance of the investment bank was “disappointing” in the quarter.
Barclays will pay a third interim dividend of 1 penny this quarter. – Stephen Morris for Bloomberg