LONDON — Barclays, already rocked by an interest rate-rigging scandal, unveiled new US regulatory investigations into the bank’s financial probity on Wednesday and said its profit was hit by charges for mis-selling insurance.
Its shares fell almost 5%, hurt by a weaker performance in investment banking than most of its Wall Street rivals and fear that legal problems would handicap its new CEO’s efforts to overhaul the company.
Following investigations in the UK over its dealings with Qatari investors, Barclays said the US Justice Department and the Securities and Exchange Commission were probing whether its relationships with third parties who helped it win or retain business complied with US laws.
The bank is under investigation by Britain’s financial regulator and fraud prosecutor into payments to Qatari investors after it raised billions of pounds from the Gulf state five years ago to save it from taking a taxpayer bail-out.
Barclays revealed the Financial Services Authority (FSA) investigation in July and confirmed the Serious Fraud Office had launched a probe the following month.
Barclays also said on Wednesday that the US Federal Energy Regulatory Commission could be close to fining it over an investigation of the manipulation of power prices in the western US from late 2006 until 2008.
The commission could notify the bank of proposed penalties as early as Wednesday, and Barclays said it would "vigorously" defend this matter. The investigation was first announced in April, alleging the bank took substantial electricity market positions to move daily index settlements.
In March, the agency fined Constellation Energy a record $245m over power market manipulation activities as part of a fresh crackdown on power market rigging.
New Barclays CEO Antony Jenkins, who took over at the end of July when Bob Diamond quit after the bank admitted rigging Libor interest rates, is in the midst of a review to change culture and lift profitability, due to be unveiled in February.
Investors had made it clear 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 the investment-banking arm will be significantly cut back.
"While we have much to do to restore trust among stakeholders, our universal banking franchise remains strong and well positioned," he said.
The bank had fired staff, clawed back pay and taken other disciplinary action after a "very rigorous" internal investigation into the Libor manipulation, Mr Jenkins said. He declined to provide more specific details on how many staff it had taken action against.
Barclays was fined $450m by US and UK regulators for the rate rigging. More than a dozen other banks are expected to be fined.
Charges hit profit
The bank said its adjusted pretax profit in the three months to the end of September was £1.73bn, in line with analysts’ forecasts and up from 1.34 billion a year ago.
But a £700m charge for misselling payment protection insurance pulled pretax profit down 23% to £1.03bn, and a £1.1bn loss on the value of its own debt dragged it to a loss of £47m for the quarter.
Investment bank income was £2.6bn in the quarter, up 17% on the same period the previous year but 13% lower than a strong performance in the second quarter.
The bank said its performance during October had been affected by the "challenging economic environment and subdued market volumes".
That included a 20% fall in income in its fixed income, currencies and commodities business from the previous quarter, a worse performance than rivals such as JPMorgan, Goldman Sachs and Deutsche Bank.
Shares in Barclays were down 3.9% at 229.5p at 11.14am GMT on Wednesday, having been as low as 227p, while the European bank index was up 0.3%.
"We were disappointed to find that total income in the investment bank fell short of market expectations, following a strong showing elsewhere in the industry," Shore Capital analyst Gary Greenwood said.
Barclays raised the prospect of soon selling bonds that convert into equity if capital nears dangerous territory.
Britain’s regulator is assessing the merits of so-called "contingent capital", which Barclays said was an "attractive" option for investors and would help its capital structure.
"We have made considerable progress with the FSA regarding the capital value to be attributed to these instruments. Now that we have greater clarity we will be engaging with investors in the next few weeks to solicit their views," finance director Chris Lucas said during a conference call on Wednesday.
Reuters
