Bloomberg News

Barclays Sorry for Libor-Rigging as Profit Beats Estimates

July 27, 2012

Barclays Pretax Profit Rises on Retail, Investment Banking

The Barclays Plc logo sits above the entrance to the company's headquarters in the Canary Wharf business district of London, U.K.. Photographer: Jason Alden/Bloomberg

Barclays Plc (BARC), the British lender fined for rigging Libor, apologized for its role in the scandal as it posted first-half profit that beat analysts’ estimates.

Pretax profit excluding one-time items rose 13 percent to 4.23 billion pounds ($6.6 billion), the London-based bank said in a statement today. That beat the 3.9 billion-pound median prediction of eight analysts surveyed by Bloomberg.

“We are sorry for what has happened,” Chairman Marcus Agius said in the statement. “However, our leadership continues to focus on the delivery of our financial performance targets.”

Barclays’s attempts to put its regulatory troubles behind it were complicated today as it said four employees, including Finance Director Chris Lucas, are being probed over the disclosure of fees related to the bank’s fundraising in 2008. The lender, whose three top executives stepped down after the bank fined a record 290 million pounds last month for Libor- rigging, also disclosed it was the target of more lawsuits in the U.S. related to the scandal.

The shares rose 4.9 percent to 161.10 pence as of 10:35 a.m. in London trading for a market value of about 19.7 billion pounds. The stock has dropped 16 percent since the June 27 fine.

The Financial Services Authority is investigating four current and former senior employees, including, Lucas, Barclays said. The bank raised 7 billion pounds of capital from investors including Abu Dhabi and Qatar sovereign wealth funds in 2008, helping the bank to avoid a government bailout. Agius told reporters on a call today that Lucas has the “full confidence” of the board and declined to comment further on the probe.

Class Actions

The bank also said it was the target of class action suits linked to its alleged manipulation of the London interbank offered rate. Barclays didn’t give an estimate of how much the suits may cost.

Total revenue at the investment bank increased by 4 percent in the first half from the year-earlier period to 5 billion pounds, as revenue from fixed income, currency and commodities jumped 11 percent. The division’s adjusted pretax profit rose to 2.6 billion pounds in the half from 2.4 billion pounds.

By contrast Wall Street’s five biggest banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., posted the lowest first-half revenue since 2008 in the first half of 2012 as trading and deal-making dried up.

‘Nobody’ Better

While FICC revenue was down 18 percent in the second quarter compared with the previous three months, the decline was still less than the 39 percent drop at firms such as Credit Suisse Group AG and Deutsche Bank AG, said Christopher Wheeler, a Mediobanca SpA banking analyst.

“In FICC, nobody has done better,” Wheeler said in a telephone interview today. “The Lehman footprint is very powerful,” he said, referring to the London-based lender’s purchase of Lehman Brothers Holdings Inc.’s U.S. operations out of bankruptcy in 2008.

The FICC unit is gaining market share, the investment banking unit’s chief executive officer Rich Ricci said on a call with analysts today. Revenue gains are “sustainable,” he said.

Total staff costs, including pay and bonuses, fell 8.4 percent to 5.15 billion pounds. The bank isn’t preparing any reductions in headcount, Ricci said.

Profit at the retail and business banking unit, overseen by Anthony Jenkins, climbed to 1.7 billion pounds from 1.5 billion pounds in the year-earlier period as provisions for bad loans and costs fell.

ROE Rises

Return on equity adjusted for credit gains and losses and one-time items rose to 9.9 percent from 9.3 percent. After taking over as CEO in 2011, Robert Diamond vowed to boost the measure of profitability to 13 percent, about double last year’s 6.6 percent ratio. He scrapped a timeline for reaching that target by 2013 in February.

The bank posted a net loss for the first half of 410 million pounds compared with a net income of 1.17 billion pounds in the year-earlier period after setting aside 450 million pounds to compensate customers wrongly sold interest-rate hedging products. The bank also recorded a 2.95 billion-pound charge linked to the value of its own credit.

Diamond, Agius and Chief Operating Officer Jerry Del Missier all said they would step down following the Libor fine. The bank is searching for a replacement chairman first before seeking a new CEO, Agius told reporters on a call today.

He also defended Barclays against pressure for it to separate its investment and consumer banking operations, saying the global universal banking model is “right” for Barclays.

To contact the reporters on this story: Howard Mustoe in London at hmustoe@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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