29th Apr 2015 09:10
LONDON (Alliance News) - Barclays PLC Wednesday reported a 27% drop in first-quarter pretax profit as the bank increased its provisions relating to authorities' investigations into currency rigging by hundreds of millions of pounds.
The increase in the size of Barclays' provision for foreign exchange provision is a stark reminder of the challenge facing Chief Executive Antony Jenkins, who promised to clean up the bank's reputation on taking the helm in 2012 after Bob Diamond's resignation following a GBP290 million fine for attempted manipulation of the London interbank offered rate.
Jenkins' efforts to present a clean-cut Barclays have been frustrated by a series of fines, litigation and regulatory probes, though he expects significant progress to be made this year in resolving the bank's woes.
Pretax profit fell to GBP1.34 billion in the three months ended March 31 from GBP1.81 billion in the corresponding quarter of the prior year, while net profit fell to GBP465 million from GBP965 million.
Net operating income fell by 3% to GBP6.08 billion as lower income net of insurance claims more than offset a fall in credit impairment charges and other provisions. Operating expenses increased by 5% to GBP4.65 billion as higher administration and general expenses more than offset lower staff costs.
The increase in operating expenses included GBP1.03 billion of litigation and misconduct costs, as it booked a provision of GBP800 million due to litigation and regulatory investigations primarily relating to foreign exchange manipulation, bringing the total provision for the scandal to GBP2.05 billion.
"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 GBP800 million this quarter, primarily relating to foreign exchange," Jenkins said in a statement.
Barclays decided against joining a settlement between six banks and regulators in the UK and US that resulted in billions of dollars of fines for rivals including London-listed HSBC Holdings PLC and Royal Bank of Scotland Group PLC, instead taking the view that it would be better to seek a "more general coordinated settlement" that would include more regulators.
Speaking to reporters in a conference call, Finance Director Tushar Morzaria said that declining to be a part of that settlement was the right decision, saying there is "fluid on-going dialogue" and the management team is focused on trying to resolve the matter.
Barclays also booked a GBP150 million provision to cover the costs of compensating customers who were mis-sold payment protection insurance, adding to the GBP5.22 billion of provisions it had recognised at the end of 2014.
The bank's adjusted pretax profit, which strips out own credit, provisions relating to misconduct, a loss on the sale of Spanish assets, as well as other items including a GBP429 million gain on the valuation of pension liabilities, increased to GBP1.85 billion from GBP1.69 billion.
Analysts had forecast an adjusted pretax profit of GBP1.81 billion, according to consensus estimates available on Barclays' website.
First-quarter pretax profit for Barclays' core division, which Jenkins set up in 2014 to house assets the bank wants to keep, increased to GBP2.10 billion from GBP1.85 billion, bolstered by the four divisions it contains.
The standout increase in core pretax profit was in Barclays investment bank, where pretax profit increased by 38% to GBP675 million, as banking and markets revenue increased due to higher fees, equities and macro income more than offset falls in lending and credit. Operating expenses within the division fell.
Core pretax profit was also driven by Barclays' Africa banking division, which reported that pretax profit increased to GBP295 million.
Personal and corporate banking, the result of the combination of Barclays' UK retail, corporate and wealth businesses, reported that pretax profit increased by 14% to GBP787 million.
Barclaycard, the bank's payments and credit cards division, reported that pretax profit fell to GBP366 million from GBP368 million.
The bank's first-quarter dividend was maintained at 1.0 pence per share.
Barclays shares were down by 0.6% at 259.85 pence on Wednesday.
By Samuel Agini; [email protected]; @samuelagini
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