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Barclays’ extra £750m forex provision overshadows profit rise

Written by: Anna Federova
Barclays has made increased provisions for a probe into currency market manipulation and other issues, masking a rise in adjusted pre-tax profits.

The bank increased provisions for potential forex costs by £750m to £1.25bn, with this and other provisions prompting a 21 per cent fall in statutory pre-tax profit, to £2.26bn.

Stripping out these safeguards, pre-tax profits at the bank rose 12 per cent during the year to £5.5m, while operating expenses were down 9 per cent as a result of a focus on cutting costs. The bank has also set aside an additional £200m for PPI redress, resulting in a full year net charge of £1.1bn.

Its wealth and investment management division saw net income rise just 1 per cent to £1.1bn, with gains for the UK offset elsewhere. Separately, Barclays made a loss of £446m on the sale of its Spanish business, which completed on 2 January 2015, and a further £100m in losses in Q1.

However, these costs were slightly offset by a £461m gain on the US Lehman acquisition assets, up from £259m the previous year.

Despite the further provisions and losses, the bank’s total operating expenses are down year-on-year, from £19.9bn to £18.1bn, excluding costs for its Transform programme, aiming to turn around the bank’s fortunes.

Antony Jenkins, group chief executive, took home a £1.1m bonus – 57 per cent of his maximum entitlement – to take his total 2014 pay above the £5m mark, but the overall bonus pool fell 22% to £1.86bn.

Jenkins said: “On cost, we delivered significant reductions in 2014, with operating costs reducing nearly £1.8bn, equivalent to 10 per cent of the group adjusted cost base excluding costs to achieve Transform.

“This achievement over the past 12 months, with further reductions to come in 2015, will better position Barclays to grow returns and drive sustainable competitive advantages across all of our businesses.” However, the chief executive did not underestimate the weight of the forex trading charges, saying these issues are a key focus for the new year.

“I regard the behaviour at the centre of these investigations as wholly incompatible with our values, and I share the frustration of colleagues and shareholders that matters like these continue to cast a shadow over our business.

“But resolving these issues is an important part of our plan for Barclays and, although it may be difficult, I expect that we will make significant progress in this area in 2015.”

The bank has also maintained its dividend per share at 6.5p, though unchanged from the previous year, and continues to target a 40 per cent-50 per cent payout ratio.

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