Barclays, already rocked by an interest-rate rigging scandal, on Wednesday disclosed new US regulatory investigations into the bank’s financial probity and also said its profit was hit by charges for mis-selling insurance.
Barclays shares fell almost 5 percent, hurt by a weaker performance in investment banking than most of its Wall Street rivals and fears that legal problems would handicap its new chief executive officer’s efforts to overhaul the company.
Following investigations in the UK over its dealings with Qatari investors, Barclays said the US Department of Justice and the US Securities and Exchange Commission were investigating whether it was complying with US laws in its relationships with third parties that help it win or retain business.
The bank is under investigation by Britain’s financial regulator and fraud prosecutor into payments to Qatari investors after it raised billions of dollars from the Gulf state five years ago to save it from taking a taxpayer bailout.
Barclays revealed the Financial Services Authority (FSA) investigation in July and confirmed that the Serious Fraud Office launched a probe the following month.
Barclays also said that the US Federal Energy Regulatory Commission could be close to fining it over an investigation into the manipulation of power prices in the western US from late 2006 to 2008.
Later on Wednesday, the energy commission issued an order saying it may seek a US$435 million civil penalty and roughly US$35 million in disgorgement from Barclays.
On top of that, the power market regulator said it may fine four Barclays traders a total of US$18 million.
The bank and its traders have 30 days to show why they should not be hit with the violations and penalties.
Earlier in the day, Barclays said it would “vigorously” defend this matter. New Barclays CEO Antony Jenkins, who took over at the end of July when Bob Diamond quit after the bank admitted rigging Libor interest rates, is in the midst of a review to change culture and lift profitability.
The bank said its adjusted pretax profit in the three months to the end of September was ￡1.73 billion (US$2.8 billion), in line with analysts’ forecasts and up from ￡1.34 billion a year ago.
However, a ￡700 million charge for mis-selling payment protection insurance pulled pretax profit down 23 percent to ￡1.03 billion, and a ￡1.1 billion loss on the value of its own debt dragged it to a loss of ￡47 million for the quarter.
Investment bank income was ￡2.6 billion in the quarter, up 17 percent on the same period the previous year, but down 13 percent on a strong performance in the second quarter.
The bank said its performance last month had been affected by the “challenging economic environment and subdued market volumes.”
That included a 20 percent fall in income in its fixed income, currencies and commodities (FICC) business from the previous quarter, a worse performance than rivals such as JPMorgan, Goldman Sachs and Deutsche Bank .