Retail banking comes to rescue as Barclays braces for a £500m penalty

Barclays to set aside nearly £500m (PA)

The retail arm of Barclays has roared back, giving the bank a much-needed shot in the arm as it admitted that it could face £500m in fines and payments for its role in the alleged rigging of the £3 trillion-a-day foreign exchange market.

Once the poor relation to a dominant investment bank, the retail side boosted profits by 18 per cent to £2.2bn in the first nine months of the year. Group-wide profits were 5 per cent ahead at £4.9bn.

And despite the foreign exchange fears, the bank’s shares crept ahead by 2.05p to finish the day at 222.55p.

Investec’s banking analyst, Ian Gordon, said Barclays “continues to confound its sceptics” with costs and loan losses both beating expectations. Job cuts have taken the bank’s cost-to-income ratio to its best level in five years. However, the numbers could not blunt the edge of the impending forex hit, with the Financial Conduct Authority preparing to release details of a settlement with six banks as soon as next month.

Barclays, HSBC and Royal Bank of Scotland, along with three overseas banks are set to pay up to £2bn in fines, with other regulators set to impose further hits. UBS and Deutsche Bank have also made huge extra “litigation” provisions, although they have not specified how much of the money set aside is earmarked for forex penalties.

The industry is also braced for the release of yet another tranche of deeply damaging emails from traders, although their language is thought to have been more technical and less boastful than that of their Libor colleagues. That scandal cost Barclays £290m and legacy issues at the investment bank, together with its recent underperformance, continue to cast a cloud over the clean-up efforts of Antony Jenkins, Barclays’ chief executive.

Mr Jenkins admitted that the investment bank, formerly Barclays Capital, was “disappointing” through the last quarter as its profits fell by 13 per cent. The division has accounted for roughly half the 7,800 jobs axed by Barclays in the past year. Around 2,500 posts, in each of 2015 and 2016, are still due to be axed as Mr Jenkins trims back on “casino banking”.

Under its former boss Bob Diamond, Barclays Capital was the group’s star performer. Now it is something of an embarrassment.

Simon Chouffot, spokesperson for the Robin Hood Tax campaign, which lobbies for a transaction tax to be imposed on the financial industry, said: “Half a billion pounds is a colossal sum, but the real shock is the regularity with which banks put aside such provisions for their scams. In what other sector would this be acceptable?

“Banks... shouldn’t be doing wrong in the first place. A Robin Hood tax would help curb the ‘greed is good’ culture and make them contribute positively to society.”

In addition to the forex provision, Barclays set aside another £170m for the mis-selling of payment protection insurance, taking its total PPI bill to more than £5bn.

But in another area of controversy – interest rate hedges mis-sold to small businesses – the bank clawed back £160m of provisions, lowering its total bill to £1.34bn.

Mr Jenkins would not comment further on the forex scandal but said of the results: “In aggregate, this is a good performance from the group. Our strategy is working, and we expect to see continued progress as we go forward.”

The bank also saw strong performances in its UK retail and corporate business, Barclaycard and in Africa.

A fine mess: Previous punishments

£500m Forex rigging

£5.06bn Mis-sold PPI

£300m Mis-sold rate hedges

£290m Libor fixing

£26m Gold fixing

£300m Energy market rigging

£38m Client custody failing