Barclays’ third quarter profits fall 26% on investment bank slump

Barclays said it was co-operating with regulators investigating the possible manipulation of currency trading by major banks, deepening scrutiny of the bank’s practices as it grapples with a slump in investment bank income.

Barclays, Britain’s third-biggest bank by market value, said it was reviewing its foreign exchange trading “covering a several year period”.

It also said it was co-operating with authorities investigating possible attempts to manipulate certain benchmark currency exchange rates.

Several banks are under the spotlight over alleged rigging in the $5.3 trillion-a-day foreign exchange market, and UBS and Deutsche Bank said yesterday they were co-operating with regulators.

The 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 withstand a trading slowdown in its core bond market.

Barclays reported underlying pretax profit of £1.4 billion sterling for the three months to the end of September, down from £1.9 billion a year ago but above an average forecast of £1.25 billion from analysts polled by the company.

Profits at its investment bank fell to £463m from £988m a year ago – below expectations. It was the unit’s lowest profit since the end of 2011 and was largely due to a 44% slump in revenue from fixed income, currency and commodities in the latest quarter.

Activity across banks has been hit by uncertainty over US monetary policy, but Barclays’ performance was worse than most of its biggest rivals.

Barclays raised £5.8 billion in a rights issue last month to meet a capital shortfall identified by its regulator. The bank said that, including the fundraising, its common equity Tier 1 capital ratio improved to 9.6%, based on full Basel capital rules that are being phased in.

The UK regulator said banks must meet a leverage ratio – a measure of its capital to assets – of 3%. Barclays said the rights issue would lift its leverage ratio to 2.9%, or 2.6% based on the same criteria used by the regulator. It plans to retain earnings and sell more assets to help reach the target.

Jenkins said he was pleased with progress in turning the bank around, but remained cautious about the operating environment.

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