(c) 2013, Bloomberg News.
(c) 2013, Bloomberg News.
LONDON — Barclays Plc, Britain's second- biggest bank, is preparing to step up its asset reduction target and said it's being probed by regulators investigating the possible manipulation of foreign-exchange markets.
Chief Financial Officer Tushar Morzaria will lead a review that will decide whether the lender will increase its 80 billion-pound ($128 billion) target, Chief Executive Officer Antony Jenkins told reporters on a conference call Wednesday as the lender posted a 26 percent fall in third-quarter pretax profit. The company plans to publish the result early next year.
Barclays this month raised 5.8 billion pounds in a rights offering after the bank in June was found one of two British lenders to miss stricter capital rules. The Prudential Regulation Authority is imposing a 3 percent leverage ratio, forcing banks to hold 3 pounds of equity for every 100 pounds of assets. Jenkins, 52, said Wednesday the London-based lender is on track to meet that requirement by June.
"It's good news, it's what needs to be done, but it's going to be a long time before the leverage debate is over," said Chirantan Barua, a banking analyst at Sanford C. Bernstein Ltd. in London, who rates the bank market perform. "But, how much money do you lose on it by removing the assets, and if it's nothing, what was it doing there in the first place?"
The lender has reduced assets by about 20 billion pounds so far, Deutsche Bank AG analysts led by Jason Napier estimated in a report to clients Wednesday.
The stock advanced 14 percent this year, lagging only Lloyds Banking Group Plc's 64 percent increase. Royal Bank of Scotland Group Plc has gained 13 percent and HSBC Holdings Plc 6.6 percent. RBS is scheduled to release third-quarter earnings on Nov. 1, followed by HSBC on Nov. 4. Lloyds on Tuesday posted a wider third-quarter loss after setting aside money to compensate clients wrongly sold payment-protection insurance.
Barclays also said it's cooperating with requests for information from regulators probing the manipulation of foreign- exchange benchmarks. The bank is reviewing its trading over a "several year" period, it added.
Bloomberg News reported in June that traders at some banks said they shared information about their positions through instant messages, executed their own trades before client orders and sought to manipulate the benchmark WM/Reuters rates. The Financial Conduct Authority has opened a formal probe, joining regulators such as in the U.S., Switzerland and the European Union.
Regulators are scrutinizing an instant-message group senior traders at firms including Barclays, Citigroup Inc. and RBS used to pool details of their positions and client orders, people with knowledge of the matter said earlier this month. Barclays has about 10 percent of the foreign-exchange market after Deutsche Bank and Citigroup, according to a survey by Euromoney Institutional Investor Plc.
Jenkins declined to comment on the probe Wednesday. Pretax profit, excluding gains and losses on the bank's own debt, fell to 1.39 billion pounds in the quarter from 1.87 billion pounds in the year-earlier period, matching the median estimate of 11 analysts surveyed by Bloomberg.
Revenue from fixed income, currencies and commodities dropped 44 percent to 940 million pounds, the lowest since 2011. That pushed investment-banking revenue 22 percent lower to 2.11 billion pounds. Still, equities revenue rose 23 percent to 645 million pounds, while investment banking income rose 7 percent to 525 million pounds.
By comparison, the five biggest U.S. investment banks saw their combined revenue from FICC trading slide 25 percent from a year ago, data compiled by Bloomberg Industries show.
Credit Suisse Group AG, Switzerland's second-largest bank, last week reported third-quarter earnings that missed analyst estimates as profit at the investment bank dropped on a 42 percent decline in revenue from fixed-income sales and trading. At Germany's Deutsche Bank AG, revenue from trading debt and other products declined 48 percent in that period.
Banks have been hurt by a slump in fixed-income trading, a key portion of their earnings, as investors waited to see whether the U.S. Federal Reserve will begin reducing economic stimulus. The Fed's September decision not to taper its $85 billion in monthly bond purchases, sent the yield on 10-year Treasury bonds down the most in almost a year.
Barclays's profit was also hurt by 101 million pounds of restructuring charges in the third quarter linked to Jenkin's overhaul plan, which seeks to make the lender more profitable by eliminating 3,700 jobs.
"I am not complacent and my executive team know we must push harder in the final quarter and into 2014," Jenkins, 52, said in the statement. "We continue to reassess the balance sheet for further leverage reduction opportunities consistent with preserving our strong franchises, supporting lending to the U.K. economy and meeting the Transform program targets."
Profit at its British consumer and business banking unit slipped to 351 million pounds from 358 million pounds. Barclays lender didn't set aside any additional money in the period to compensate clients sold payment protection insurance that didn't cover them or they didn't need. The lender made a 1.35 billion- pound provision in the second quarter.
The lender said it's also being probed by regulators over whether it properly disclosed 322 million pounds of payments to Qatar's sovereign wealth fund as part of a 7 billion-pound fundraising during the financial crisis, a move that helped the bank avoid a government bailout. The British markets regulator said last month it may fine the bank 50 million pounds. Barclays said Wednesday it's still contesting the findings.