Bad day for Barclays: Bank posts loss after new £700m PPI bill and now faces ...

In three months to September Barclays lost £47m, compared to a profit of £2.4bn in the same quarter last year
Banks forced to set aside another £700m for PPI and has £1.1bn debt charge
Today it admits US government looking at whether it breached corruption laws

By
Ed Monk and Martin Robinson

PUBLISHED:

07:22 EST, 31 October 2012

|

UPDATED:

07:46 EST, 31 October 2012

Barclays is on the rack again after it posted a £47million pre-tax loss on the day it confirmed it faces two new corruption investigations by the US authorities.

Its painful results, caused by setting aside an extra £700million for PPI compensation and a £1.1bn debt charge, compares to a £2.4bn profit in the same period last year.

The bank has now kept £2billion for PPI claims, which have been ‘higher than
previously anticipated’.

Profits tumble: Barclays posted a loss this morning of £47 million, after having to set aside more for PPI claims and pay debts

Its dramatic profit fall caused its shares to drop more than four per cent this morning.

Meanwhile Barclays also confirmed it is being investigated by the US Department of Justice and US Securities and Exchange Commission over whether it has breached corruption laws.

New broom: New boss Antony Jenkins acknowledged that the bank needed to rebuild its reputation.

New broom: New boss Antony Jenkins acknowledged that the bank needed to rebuild its reputation as it faces two new investigations in America

It faces serious allegations about how it won business using third parties in the past, as well as its conduct relating to the global trading of electricity.

The bank is already trying to rebuild its reputation after it was fined £290million for manipulating Libor – the rate at which banks lend to eachother.

New Barclays boss Antony Jenkins insisted the bank was in good shape today despite a torrent of reputation-scarring scandals and a £47 million quarterly loss.

Delivering his first set of results since taking over from Bob Diamond in the wake of the Libor-fixing affair, Mr Jenkins said the lender had ‘much to do to restore trust among stakeholders" but remained "strong and well-positioned’.

The bank is already under investigation by the Financial Services Authority (FSA) and Serious Fraud Office into payments to Qatar investors after the bank raised billions of pounds from them five years ago to save it from taking a taxpayer bailout.

Barclays shares fell 10.82p, of 4.38 per cent, to 227.98p in morning trading after the results.

The latest two investigations take the number of scandals involving alleged malpractice at Barclays to five.

The come on top of the Libor manipulation scandal which led to Barclays being fined £290million by US and British authorities in June, and potential legal action over the sale of complex interest-rate swap products to business customers.

PA Graphic - Barclays Profits

Additionally, Barclays, in common with most other UK banks, is still paying the price for widespread mis-selling of payment protection insurance (PPI).

Barclays reported a statutory loss of £47million in the three months to September, compared with a £2.4billion profit in the same quarter last year.

The loss was driven by a £700million hit to cover mis-sold PPI claims and a one-off £1billion charge against the value of the bank’s own credit.

But stripping out the impact of the PPI charge, the bank reported underlying pre-tax profits for the third quarter of £1.7billion, compared with £1.3billion last year.

The investment bank – the powerhouse built by Mr Diamond – more than doubled its third quarter underlying pre-tax profits to £937million, while UK retail banking slipped 19 per cent year-on-year to £400million in the same period.

Marcus Agius will step down today as chairman of the bank, as Sir David Walker prepares to take up the role from tomorrow.

Carla Antunes-Silva, analyst at Credit Suisse, said the figures were in line with consensus but its outlook was cautious.

The bank warned its performance during October continues to be affected by the challenging economic environment and ‘subdued’ market volumes.

Barclays reduced bad-debt charges by 19 per cent year on year to £825million in the third quarter, while its exposure to the troubled eurozone economies of Spain, Italy, Portugal, Ireland, Greece and Cyprus fell by 15 per cent to £4.8billion.