Business World

Friday 29 August 2014

A further blow for Barclays as US authorities launch investigations

Steve Slater and Matt Scuffham

Published 01/11/2012 | 05:00

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BARCLAYS has revealed new US regulatory investigations into the bank's financial probity and said its profits were hit by charges for mis-selling insurance. It has already been rocked by an interest-rate rigging scandal.

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The bank's shares fell almost 5pc, hurt by a weaker performance in investment banking than most of its Wall Street rivals and fears that legal problems would handicap efforts by its new chief executive to overhaul the company.

Following investigations in the UK over its dealings with Qatari investors, Barclays has now said that the Department of Justice and Securities and Exchange Commission is probing whether its relationships with third parties who help it win or retain business are compliant with US laws.

The bank is under investigation by Britain's financial regulator and fraud prosecutor, who are looking into payments made to Qatari investors after Barclays had raised billions of pounds from the Gulf state five years ago, which saved it from taking a taxpayer bailout.

Barclays has also said that the US Federal Energy Regulatory Commission may be close to fining it over an investigation into the manipulation of power prices in the western United States from late 2006 until 2008.

Barclays' new CEO, Antony Jenkins -- who took over at the end of July when Bob Diamond quit after the bank had admitted rigging Libor interest rates -- is in the midst of a review to change the bank's culture and lift its profitability. The plan is due to be unveiled in February.

Rigging

Investors have made it clear that they want a return on equity above the cost of equity, higher dividends and for pay to be cut, Mr Jenkins said. That is expected to mean that the investment bank arm will be significantly cut back.

Barclays was fined $450m (€348m) by US and UK regulators for the rate rigging. More than a dozen other banks are also expected to be fined.

Meanwhile, Barclays said its adjusted pre-tax profit in the three months to the end of September was £1.73bn (€2.15bn). This is in line with analysts' forecasts and up from £1.34bn (€1.67bn) a year ago.

But a £700m (€870m) charge for mis-selling payment-protection insurance pulled pre-tax profit down 23pc to £1.03bn (€1.28bn). A £1.1bn (€1.37bn) loss on the value of its own debt dragged it to a loss of £47m (€58.5m) for the quarter.

Investment bank income was £2.6bn (€3.23bn) in the quarter, up 17pc on the same period of the previous year, but down 13pc on a strong performance in the second quarter.

The bank said performance during October had been affected by the "challenging economic environment".

Shares in Barclays were down 3.9pc at 229.5p pence, having been as low as 227p. (Reuters)

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