Barclays sets aside further £800m to cover forex probes

Barclays has put aside a further £800m to cover the cost of investigations into manipulation of foreign exchange markets, offsetting a rebound in its investment bank and dragging its quarterly profits down more than a quarter.

The move takes the UK bank's total provisions for forex investigations and litigation to slightly more than £2bn.

Barclays is one of five banks expected to settle allegations that they manipulated the forex markets in an agreement with the US Department of Justice and several other regulators as soon as next month.

It said on Wednesday that pre-tax profits fell 26 per cent to £1.34bn in the three months to March as a result of the forex charge and other one-off costs, such as an extra £150m provision to compensate UK customers for mis-selling of payment protection insurance. These were partly offset by a £429m gain for a change in its pension valuation.

Overall, statutory profits halved year-on-year to £465m, dragging its return on tangible shareholders equity down from 8.4 per cent to 4 per cent.

But adjusted profit, stripping out exceptional items, increased by 9 per cent, helped by a particularly strong rebound in its investment bank. Pre-tax profits at the unit were up 37 per cent, while they were up 14 per cent in its retail banking arm and 23 per cent in its African banking division.

"This further demonstrates that the Transform strategy is working and, while there is more to do, the business is starting to realise its potential," Antony Jenkins, chief executive, said in a statement.

Rivals in the US and Europe, such as Goldman Sachs and Credit Suisse, have enjoyed a strong recovery in debt and equity trading revenues during the first quarter thanks to a return of market volatility.

Germany's Deutsche Bank, Barclays' closest rival in Europe, reported a 15 per cent year-on-year rise in investment banking revenues in the period. But in contrast, Barclays said revenues at its investment bank rose only 2 per cent, as lower credit trading income offset rises in macro, equities and banking income.

Analysts said the results were broadly in line with expectations, but some flagged up a disappointing quarter from the usually strong Barclaycard credit card division.

"If we would nit-pick any area, it would be Barclaycard where profit before tax was down 1 per cent year-on-year against 15 year-on-year loan growth," said Joseph Dickerson, analyst at Jefferies.

Barclays last year dumped unwanted parts of its business into a non-core unit, or "bad bank", including parts of its fixed income, commodities and trading operations as well as retail banking units in Spain, Italy, France and Portugal.

It said on Wednesday that this non-core unit had been reduced from £110bn of risk-weighted assets to about £65bn.

The bank's common equity tier one ratio - a key measure of financial strength - rose from 10.3 per cent in December to 10.6 per cent in March. Its leverage ratio - measuring equity to total assets - was stable at 3.7 per cent.

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