Friday 22 November 2019

Barclays to set aside more for forex fines and customer compensation

Antony Jenkins, chief executive officer of Barclays Plc
Antony Jenkins, chief executive officer of Barclays Plc

Barclays is expected to set aside more money for potential foreign exchange fines and to add to its compensation tab for UK customer mis-selling, eating into an expected slim rise in profits.

Barclays last year set aside 500 million pounds to cover potential fines and litigation for foreign exchange manipulation, but Chief Executive Antony Jenkins has already said that will not be enough.

Rivals including HSBC (HSBA.L) and Royal Bank of Scotland (RBS.L) last week put more aside for the issue and Barclays will more than double its provision in results due on Tuesday, Sky News has reported.

Barclays pulled out of a settlement between U.S. and UK authorities and six banks in November because it had not reached a deal with New York's regulator, and it still wants to conclude most regulatory settlements together, sources have told Reuters.

The British bank is also likely to follow rivals and top up the amount it sets aside as compensation for mis-selling of loan insurance, possibly by about 300 million pounds, analysts said.

The provisions will be part of Barclays' 2014 results, where investors will want to see costs have fallen significantly - a core part of Jenkins' plan to become less reliant on investment banking and improve its capital strength and profitability.

"We think execution was good last year, but believe that the market still struggles ... to be confident that Barclays is the master of its own destiny as far as future returns are concerned," said Deutsche Bank analyst Jason Napier.

Tougher UK and U.S. regulations and low investment banking returns could encourage Jenkins to prune the investment bank beyond last year's targets to shed more than 40 percent of its assets and axe 7,000 jobs. The investment bank's income is likely to fall in the fourth quarter after a grim end to the year for bond trading.

Barclays is expected to cut its bonus pool for staff to less than 2 billion pounds from 2.4 billion for 2013. Jenkins will take a bonus of about 1 million pounds and total 2014 pay of about 5 million, Sky News reported.

Barclays declined to comment.

The bank is expected to report a pretax profit of 5.3 billion pounds, up from a restated 4.9 billion for 2013, according to the average forecast from analysts polled by the bank.

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