Barclays hit by slump in trading revenue

Barclays said third-quarter pretax profit dropped 26 per cent, hurt by a slump in trading revenue as the UK's second-largest bank by assets seeks to plug a capital shortfall. Pretax profit, excluding gains and losses on the bank's own debt, fell to £1.4 billion from £1.9 billion in the year-earlier period, the London-based lender said in a statement today.

Revenue from fixed income, currencies and commodities dropped 44 per cent to £940 million, the lowest since 2011. Chief executive officer Antony Jenkins this month raised £5.8 billion in a rights offering after the bank in June was found one of two British lenders to miss stricter capital rules.

Barclays, which is seeking to cut annual expenses by £1.7 billion by 2015 under its Transform program, said last month a slump in FICC at its investment bank hurt revenue in July and August. The lender restated earnings for 2012 in April. “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.”

In the UK, lenders have also been struggling with stricter capital rules, after the Prudential Regulation Authority imposed a 3 per cent leverage ratio, forcing banks to hold £3 of equity for every £100 of assets. Jenkins said today the bank is on track to meet the target by June. Under Basel III rules, Barclays’s capital shortfall swelled to £12.8 billion at the end of the first half.

The lender is being probed by regulators over whether it properly disclosed £322 million of payments to Qatar’s sovereign wealth fund as part of a £7 billion fundraising during the financial crisis, a move that helped the bank avoid a government bailout. The U.K. markets regulator said last month it may fine the bank £50 million . The bank said today it’s still contesting the findings.

Barclays is also among banks being scrutinised by regulators investigating potential manipulation of the foreign- exchange market. The UK’s Financial Conduct Authority has opened a formal investigation, joining regulators such as in the US, Switzerland and the European Union.

Barclays also said that it has been contacted by regulators and is “reviewing its foreign exchange trading covering a several year period” through August. The bank is cooperating with “relevant authorities in their investigations,” according to the statement. “It’s not possible at this stage for Barclays to predict the impact of these investigations,” the bank said

Bloomberg