Barclays puts aside £800m for alleged forex rigging as profits drop 26%

29th April 2015


Barclays has made a further £800m allowance to cover costs associated with alleged foreign exchange rate rigging, as it announced a 26% drop in quarterly profits to £1.34bn.

put aside another £800m, largely to cover potential further legal action and penalties for alleged foreign exchange manipulation.

The bank set aside a further £150m to add to the total for payment protection insurance (PPI) mis-selling, bringing its total bill to £5.4bn. In total UK banks have paid out more than £26bn.

Disregarding one-off items, Barclays’ adjusted profit was up 9% to £1.85bn.

As part of an overhaul of the company, costs have been cut by 7% and investment risks reduced.

Antony Jenkins, chief executive, remained positive about the results.

He said: “This performance represents another quarter of continued delivery, with further progress towards becoming the Go-To Bank.

“Our core business, the future of Barclays, generated an adjusted profit before tax of £2.1bn, up 14% and representing our best quarterly performance in several years. Return on average equity was close to 11%, while return on average tangible equity was above 13%.”

He added: “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.

” While we still have much to do, I am pleased with how we’ve begun 2015.Barclays has now put aside £2.05bn to cover foreign exchange settlements.”

Last year, six leading banks reached a settlement with US and UK regulators over allegations they were trying to rig the foreign exchange market, but Barclays has yet to reach a deal for its alleged malpractice.

Analysis: what it means for investors

Graham Spooner, investment research analyst at The Share Centre, says: “This morning, Barclays announced its first quarter results, amidst a new £800m provision over foreign-exchange activities. Net profit came in at £465m, compared to £965m in the same period last year. The provisions overshadowed what Barclays said had otherwise been its best quarter in years, once one-off charges are stripped out. New chairman, John McFarlane, recently wrote to shareholders to say that whilst the issues from the past “unfortunately still haunt us,” the bank has a solid foundation.

“Investors should note that there appears to be light at the end of the tunnel. The bank has shown signs of improvement as a result of its ongoing restructuring. Barclays has successfully cut its costs by 7% and is continuing to work toward its goal of shedding staff, shrinking its investment bank and improving the group’s capital strength.

“The bank’s new strategy has forecast that its dependence on investment banking will be significantly lower by 2016, and investors should watch to make sure this remains on track. Barclays also expects to increase the dividend pay-out ratio to 40%, which may please investors. The Share Centre recommends Barclays as ‘hold’ for medium risk investors seeking a balanced portfolio. Our preferred bank is HSBC, as it has remained a significant income payer and it is viewed as more conservatively managed with a superior balance sheet and deposits.”

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