Barclays hit by two fresh US investigations
By Steve Slater and Matt Scuffham, Reuters
November 2, 2012, 12:25 am TWN
LONDON -- Barclays, already rocked by an interest-rate rigging scandal, on Wednesday disclosed new U.S. regulatory investigations into the bank's financial probity and also said its profit was hit by charges for misselling insurance.
Its shares fell almost 5 percent, hurt by a weaker performance in investment banking than most of its Wall Street rivals and fears that legal problems would handicap its new chief executive's efforts to overhaul the company.
Following investigations in the UK over its dealings with Qatari investors, Barclays said the U.S. Department of Justice and Securities and Exchange Commission were probing whether it was complying with U.S. laws in its relationships with third parties who help it win or retain business.
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 bailout.
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 the U.S. Federal Energy Regulatory Commission (FERC) could be close to fining it over an investigation into the manipulation of power prices in the western United States from late 2006 until 2008.
Later on Wednesday, FERC issued an order saying it may seek a US$435 million civil penalty and roughly US$35 million in disgorgement from Barclays. On top of that, the power market regulator said it may fine four Barclays traders a total of US$18 million.
The bank and its traders have 30 days to show why they should not be hit with the violations and penalties.
Earlier in the day, 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 US$245 million over power market manipulation activities as part of a 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 have made it clear they want a return on equity above the cost of equity, higher dividends and for pay to be cut, Jenkins said. That is expected to mean the investment bank arm will be significantly cut back.
The bank has fired staff, clawed back pay and taken other disciplinary action after a “very rigorous” internal investigation into the Libor manipulation, Jenkins said. He declined to provide more specific details on how many staff it had taken action against.
Barclays was fined US$450 million by U.S. and UK regulators for the rate rigging. More than a dozen other banks are expected to be fined.
The bank said its adjusted pretax profit in the three months to the end of September was 1.73 billion pounds, in-line with analysts' forecasts and up from 1.34 billion a year ago.
But a 700-million-pound charge for misselling payment protection insurance pulled pretax profit down 23 percent to 1.03 billion pounds, and a 1.1 billion pound loss on the value of its own debt dragged it to a loss of 47 million pounds for the quarter.