LONDON (Reuters) - Barclays is cooperating with regulators investigating possible manipulation of currency trading by banks, deepening scrutiny of its conduct as it also grapples with a slump in investment banking income.
Britain’s third-biggest bank by stock market value said on Wednesday it was reviewing its foreign exchange trading over several years and was cooperating with authorities investigating possible attempts to manipulate certain benchmark rates.
Several banks are under the spotlight over alleged rigging in the $5.3 trillion-a-day foreign exchange market.
UBS and Deutsche Bank are also cooperating with regulators, while Royal Bank of Scotland said it is reviewing its FX processes.
The forex investigation adds to a string of probes faced by Barclays boss Antony Jenkins, who took over as chief executive 14 months ago and is trying to rebuild his bank’s reputation after a series of scandals while trying to streamline his bank and improve profitability.
“From time to time these legacy issues will arise and will have to be dealt with,” Jenkins said. “We are in the process of changing the culture of Barclays. I’ve said it will take five to 10 years to deeply embed that cultural change, and we are on track.”
Jenkins declined to comment further on the currency probe or on other investigations, such as a fundraising from investors in Qatar five years ago when Barclays acted “recklessly” for failing to disclose payments, according to Britain’s financial watchdog.
Barclays reported an underlying pre-tax profit of 1.4 billion pounds for the three months through September, down from 1.9 billion a year ago but above an average forecast of 1.3 billion from analysts polled by the company.
Profits at its investment bank fell to 463 million pounds from 988 million, which was below expectations.
It was the unit’s lowest quarterly profit since the end of 2011 and was due to a 44 percent slump in revenue from fixed income, currency and commodities.
Activity across banks has been hit by uncertainty over U.S. monetary policy, but Barclays’ performance was worse than most of its biggest rivals. Equities and advisory businesses performed strongly, however, with income up on the year.
Barclays shares, which had dropped to a two-month low of 258.05 pence at one stage on Tuesday, were up 3.6 percent at 275.5 pence by 0945 GMT, outpacing a 0.8 percent rise by the European banking index.
Analysts said a poor performance in bond trading had been expected and the absence of any new provisions for mis-selling was positive.
“Barclays is at a stage where management attention in the medium term will largely be focused on fixing the deleveraging process and boosting capital levels,” said analyst Chirantan Barua at brokerage Bernstein. “Meanwhile (the) fixed income outlook globally remains muted in the medium term.”
Jenkins’ turnaround plan also involves shrinking his bank and he said a plan to get rid of 80 billion pounds of assets will be exceeded.
“I can say with certainty that over time we will achieve more than the 65 to 80 billion (pound) reduction we committed to in July,” he said.
New finance director Tushar Morzaria will lead a new review of assets and details will be announced in February.
That deleveraging is part of a plan that also included a 5.8 billion pound rights issue last month to meet a capital shortfall identified by its regulator, based on getting its leverage ratio - a measure of its capital to assets - to 3 percent.
Barclays said the rights issue would lift its leverage ratio to 2.9 percent, or 2.6 percent based on the same criteria used by the regulator.
Its common equity Tier 1 capital ratio improved to 9.6 percent, based on full Basel capital rules being phased in. Analysts said Britain could require its banks to hold core capital of near 12 percent as standard, based on a consultation currently underway, but Jenkins said his goal to hold 10.5 percent “is the right target” over the medium term.
Editing by Tom Pfeiffer and David Holmes