Barclays has given an indication about the scale of potential fines looming across the banking industry by setting aside £500m to cover the cost of the on-going investigations into rigging currency markets.
The provision is larger than the £290m of total fines that the bank received for manipulating Libor in 2012 and is being revealed as the Financial Conduct Authority attempts to agree a settlement with six major banks over their activities in the £3.5tn a day foreign exchange markets. The regulator is working towards revealing the outcome of this investigation and the scale of the penalties next month. Royal Bank of Scotland, which reports its results on Friday, is also part of the investigation.
Barclays disclosed the provision as it reported its figures for the third quarter of the year, in which it also took an extra £170m hit to cover the cost of the payment protection insurance mis-selling scandal.
Antony Jenkins, promoted to become boss of the bank in the wake of the Libor-rigging scandal, described the performance of the once-dominant investment banking arm, where profits plunged by more than a third, as “disappointing”.
Profits for the entire bank for the nine months to the end of September rose 5% to £4.9bn when items such as a £364m loss on the sale of its troubled Spanish business are stripped out. On a statutory basis the profits rose 31% to £3.7bn.
In the investment banking arm – which had grown rapidly under Jenkins’ predecessor, Bob Diamond – profits were down 38% during the nine months although profits on the high street banking operations rose 18% to £2.2bn.
Jenkins has set out a plan to cut 19,000 jobs from the bank as he tries to scale back the investment banking arm, which has repeatedly caused conflict with investors over the size of the bonuses handed out to top staff. Around 7,000 of the job cuts were earmarked for the investment bank’s 24,000-strong workforce when he announced the overhaul in May.
In the third quarter, the investment bank’s profits fell more steeply, to £284m from £465m.
Barclays was able to release £160m of the £1.5bn provision it has already made to cover compensation claims for small businesses mis-sold interest rate hedging products. The additional £170m provision for PPI claims takes the bank’s total provision to £5bn and comes after Lloyds Banking Group made a further £900m provision, taking its total bill to more than £11bn. The PPI scandal is the costliest ever incurred by banking industry.
