Barclays has set aside 500 million pounds ($799 million) to cover potential fines for manipulating currency markets. As Sara Hemrajani reports, it's taken the shine off a rise in third quarter profits as its retail business performed well and costs were cut.
Barclays' latest numbers hint at the potential size of its regulatory woes. The British bank revealed it's set aside 500 million pounds in the face of ongoing investigations into currency market manipulation. Regulators are looking into allegations that traders used online chatrooms to plan the rigging of foreign exchange rates. That looming penalty is taking the shine off a rise in profits. Underlying pretax profit in the third quarter actually jumped 15% from a year before. George Hay is from Reuters Breakingviews. (SOUNDBITE) George Hay, Reuters Breakingviews Columnist, saying (English): "The good news for them is that elsewhere in the bank they are doing fairly well, certainly well enough to beat consensus on an overall level. So they'll be pleased with that." Barclays boss Antony Jenkins is trying to improve the state of the lender's balance sheet. He's shrinking the investment banking unit, slashing costs and reducing the headcount. But Barclays may still need to tackle a capital shortfall should the Bank of England decide to impose tougher standards on the industry. Michael Hewson is chief market analyst at CMC Markets. (SOUNDBITE) Michael Hewson, Chief Market Analyst, CMC Markets, saying (English): "Now Bank of England numbers are due out later this week with respect to that, and if they come in higher than the European banking leverage ratio, then Barclays could well have to raise extra capital. Well that could be very, very difficult, particularly at this particular time when banks are under scrutiny more than ever." The results cap what's been a disappointing week for European banks. Deutsche Bank and Standard Chartered also announced that probes and mounting legal expenses had taken a toll on their bottom line.