The bank is effectively signalling that it expects to faceat least £2bn in penalties and litigation from regulators in the UK and US, which are investigating the manipulation of the £3.5tn-a-day forex markets. Major banks have already been fined £2.6bn for the offences but Barclays was not part of the co-ordinated settlement announced in November, pulling out at the last moment.
Campaigners for a tax on financial markets said the increasing scale of the penalties showed it was time to get a tighter grip on banks. “The sheer scale of Barclays’ provisions for ripping people off and fiddling markets is staggering. It’s a disgrace that such industrial-scale scamming has become the norm in the City. It’s bad for banks and it’s bad for Britain,” said David Hillman, spokesman for the Robin Hood tax compaign.
The charges – £800m for currency market manipulation and £150m for PPI – resulted in profits falling by 26% to £1.3bn in the first three months of the year. The additional £800m for foreign exchange rigging comes just two months after it raised its provision to £1.25bn – raising speculation that a fine is imminent.
Antony Jenkins, Barclays’ chief executive, focused on a 9% rise in underlying profits as he admitted the bank faced further penalties. He has been attempting to restore the bank’s reputation after taking the helm following the £290m fine for Libor manipulation in June 2012.
“Resolving legacy conduct issues is also an important part of our plan to transform Barclays. We are working hard to expedite their settlement and have taken further provisions of £800m this quarter, primarily relating to foreign exchange,” said Jenkins.
Tushar Morzaria, finance director, would not elaborate on what Jenkins meant by saying “primarily relating to foreign exchange”, but said the bank was hoping to settle “expeditiously”.
Morzaria added: “We are working as hard as we can to resolve this matter.”
He said Barclays’ new chairman, John McFarlane, was a “terrific addition to the company”. McFarlane took over from Sir David Walker last week and is known for taking swift action to change management teams as chair of insurer Aviva.
McFarlane, who is chairing his last annual general meeting of Aviva on Wednesday, wrote to Barclays shareholders last week and indicated the need to settle regulatory cases. “We therefore need to get the errors of the past behind us, to achieve a satisfactory rate of revenue growth, greater cost discipline and a more dynamic reallocation of capital. While substantial progress has been achieved … it is transparent that a great deal still needs to be done,” he said last week.
The bank now holds £2.5bn of provisions for legal, compliance and regulatory matters, £2bn of which is related to the foreign exchange markets.
Its annual report lists a sting of potential legal matters including investigations into precious metals markets, the sale of mortgage bonds before the financial crisis and an on-going dispute with the Financial Conduct Authority over a £50m fine in relation to its rescue funding from Middle Eastern investors at the height of the crisis.
The bank’s first-quarter profits were also knocked by a £118m loss on the sale of its Spanish business.
Profits in the investment banking division – which is undergoing an overhaul after rapid growth under Jenkins’ predecessor Bob Diamond – reported a 37% rise in profits to £675m, while profits in Barclaycard slipped 1% to £366m. Profits in the high street arm rose by 14% to £747m.
This article was written by Jill Treanor, for theguardian.com on Wednesday 29th April 2015 08.18 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010