Barclays bank in third-quarter loss due to provision for customer insurance, debt writedown

LONDON – British bank Barclays PLC reported a net loss of 200 million pounds ($322 million) in the third quarter Wednesday as it wrote down the value of its own debt and set aside 700 million pounds to compensate customers in the payment protection insurance scandal.

The bank also disclosed it was facing two investigations in the United States regarding possible violations of the Foreign Corrupt Practices Act and its power-trading activities.

The loss compared with a profit of 2.7 billion pounds a year ago, while total income was down 2 percent to 6.9 billion pounds ($11.2 billion). Adjusted pretax profit was up 29 percent to 1.7 billion pounds.

The results were broadly in line with investor expectations except for income from Barclays' Investment Bank, which was weaker than at its main competitors, said Gary Greenwood, analyst at Shore Capital.

"We remain neutral on the shares given the uncertain outlook, particularly in respect of the regulatory landscape associated with investment banking," Greenwood said.

The bank's shares were 4.5 percent lower at 228.15 pence in midmorning trading on the London Stock Exchange.

The biggest dent in earnings came from a charge of 1.1 billion pounds ($1.8 billion) on the value of the bank's own debt, compared with a gain of 2.9 billion pounds gain a year earlier.

Barclays also booked more provisions for payment protection insurance, which Barclays disclosed earlier this month. That raised the bank's total provisions to 2 billion pounds. Other major British banks also face big costs for selling the insurance to customers who either didn't need it or want it.

It was the bank's first earnings report since Anthony Jenkins was appointed chief executive in August. He replaced Bob Diamond, who resigned following revelations that some Barclays employees had attempted to manipulate the London interbank offered rate (LIBOR), a key global financial index.

Jenkins said the results demonstrated good momentum but added, "we have much to do to restore trust among stakeholders."

Barclays completes its change of command on Wednesday as Marcus Agius steps down as chairman, giving way to David Walker, a former chairman of Morgan Stanley International who more recently led a government inquiry into corporate governance at banks.

Barclays is being sued by Guardian Care Homes, which is seeking damages of up to 38 million pounds for allegedly mis-selling interest rate swaps in 2007 and 2008. A British judge on Monday ordered the bank to disclose the names of staff involved in alleged Libor rigging. It's viewed a test case that could bring a flood of similar claims.

Jenkins told reporters they could "rest assured" that bonuses had been reclaimed from individuals involved in the Libor scandal, but he refused to identify them or say how many had been fired or disciplined.

The bank disclosed that its power-trading activities between 2006 and 2008 were being investigated by the U.S. Federal Energy Regulatory Commission, and that it expected a notice of proposed penalties to be issued soon. "Barclays intends to vigorously defend this matter," it said.

The bank also said the U.S. Department of Justice and the U.S. Securities and Exchange Commission are investigating possible violations of the Foreign Corrupt Practices Act. News reports said the investigation centered on fundraising in the Middle East in 2008 which allowed Barclays to weather the banking crisis without a government bailout. The case is also subject to British investigations.

Barclays said it continued to be affected this month by a difficult economic environment and subdued market volumes.

"We continue to be cautious about the environment in which we operate and have positioned the Bank accordingly with an intense focus on costs, returns and capital," the bank said.