Barclays posts loss as it attempts to emerge from its dark past

Barclays reported a third quarter pre-tax loss of £47 million on Wednesday amidst a plethora of different fines that have hindered its business operations and reputation.

The results show improved underlying performance of the bank but have been overshadowed by the number of investigations and fines the bank faces for its past behaviour. This illustrates just what a big job Barclay’s new boss Anthony Jenkins has in restoring the battered reputation of Barclays.

It increased its provision for payment protection insurance (PPI) by £700 million to £2 billion. With Lloyds announcing an extra £1 billion in PPI provision in its quarterly results today, it takes the total set aside by UK banks for PPI mis-selling to £11 billion and counting.

Barclays have also been ordered to pay fines of £293 million by the US energy regulator after the bank was found guilty of manipulating the American electricity market. The bank says it intends to fight the allegations “vigourously”.

The US Federal Energy Regulatory Commission (FERC) has issued a provisional fine of $435 million and ordered Barclays to repay $35 million in “unjust profits” due to trading manipulation. It also fined four Barclays’ traders a total of $18 million for taking part in the alleged scheme.

Barclays faces five major investigations which have still to be concluded and could result in further fines and more damage to its reputation. 

Manipulating energy prices

As detailed above, the potential £293 million fine is for trying to manipulate the price of electricity in California between 2006 and 2008. Barclays says it intends to “vigourously” fight the allegations.

Mis-selling payment protection insurance

In its latest quarterly results for the three months to the end of September, published on Wednesday, Barclays has increased its PPI provision by £700 million to £2 billion. This takes the total set aside by UK banks to £11 billion after Lloyds announced a further £1 billion provision in its third quarter results today. There could be more to come too.

Manipulating interest rates

Barclays was at the centre of the Libor rate-rigging scandal, though it was not the only bank involved. The activities, in which a key benchmark interest rate that is used to set interest rates for common financial products such as mortgages, loans and credit card interest rates, led to the resignation of Barclays chief executive Bob Diamond earlier this year.

The Financial Services Authority (FSA) says that it is investigating up to 16 other banks.

Mis-selling interest rate swaps

Barclays has made a further provision for this scandal. It has set aside £450 million to cover the mis-selling of complex interest rate swap deals sold to small businesses as a way for them to protect themselves against rising interest rates. These were sometimes sold as a condition of being approved for a loan. Once again, Barclays is not the only bank to be involved in this scandal.