Barclays to Take $545 Million Charge for Lawsuits, Penalties

Jan 29, 2014 12:11 pm ET

(Updates with RBS provisions in fifth paragraph.)

Jan. 29 (Bloomberg) -- Barclays Plc, the U.K.’s second- largest bank by assets, will take a charge of 330 million pounds ($545 million) for regulatory penalties and lawsuits in the fourth quarter.

The lender will set aside 110 million pounds from income at its investment bank and 220 million pounds against costs, London-based Barclays said in a statement today. The bank also said it has no plans to announce “significant” cuts to its U.K. branches after the Financial Times reported it will close about a quarter of its 1,600 in Britain.

Regulators are investigating Barclays for possible manipulation of foreign-exchange markets and the bank is reviewing its trading over a “several-year” period, it said in October. A spokesman declined today to say what the regulatory penalties and lawsuits are for.

The bank will keep its cost target of 16.8 billion pounds by 2015, it said. Barclays closed up 0.6 pence to 274.95 pence in London trading, after earlier gaining as much as 4.2 percent.

This week, Royal Bank of Scotland Group Plc said it would set aside 3.1 billion pounds for legal and compensation claims, including 1.9 billion pounds for lawsuits and fines tied mostly to the sale of $91 billion of mortgage-backed securities from 2005 to 2007.

RBS Loss

RBS may now post a loss before tax and gains and losses on its own debt of about 6.8 billion pounds for 2013, said Gary Greenwood, an analyst at Shore Capital in Liverpool, England, who previously expected the loss would be about 3.3 billion pounds. It would be the biggest since 2008, when the lender posted a loss of about 8.3 billion pounds, he said.

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

The U.S. Department of Justice is also probing whether the lender made payments that violated the Foreign Corrupt Practices Act to win a banking license for its wealth-management unit and investment bank in Saudi Arabia, the Financial Times reported in 2012.

Barclays plans to cut hundreds of jobs including directors and managing directors at its investment bank, a person with knowledge of the discussions said yesterday. It employed about 24,000 people in the unit at the end of 2012.

Chief Executive Officer Antony Jenkins said in February he is seeking to remove 1.7 billion pounds of annual expenses by 2015, eliminating 3,700 positions. The lender said in June it would move 4,000 administrative jobs at its investment bank to lower-cost locations to reduce expenses.

The bank is scheduled to report full-year earnings on Feb. 11.

--With assistance from Lindsay Fortado in London. Editors: Jon Menon, Steve Bailey