Barclays said it was setting aside a further £700 million ($1.13 billion, 862 million euros) to compensate clients mis-sold insurance by the embattled British bank.
Barclays, which has recently suffered a boardroom shake-up after being rocked by the Libor interest rate-rigging scandal, said it was hiking its total bill from the insurance mis-selling saga to £2.0 billion.
The bank, which will announce third-quarter results on October 31, added that adjusted pre-tax profits, before exceptional items, would be “broadly in line with current market consensus of £1.7 billion” for the three months to September.
Barclays’ share price slid 1.51 per cent to close at 240.7 pence on London’s FTSE 100 index of leading companies, which rose 0.10 per cent to 5,917.05 points.
“Barclays has experienced higher than previously anticipated levels of Payment Protection Insurance (PPI) claim volumes since the end of the first half, and has therefore determined that it is appropriate to provide a further £700 million,” the lender said in a statement.
“This is in addition to provisions recognised of £1 billion in 2011 and £300 million in the first quarter of 2012.
“Based on claims experience to date and anticipated future volumes, the resulting provision includes Barclays best estimate of expected costs of future PPI redress,” the bank said. Back in April 2011, Britain’s biggest banks lost a high court appeal against tighter regulation of PPI, which provides insurance for consumers should they fail to meet repayments on a credit product such as consumer loans, mortgages or payment cards. PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments.
British authorities subsequently banned simultaneous sales of PPI and credit products. The nation’s biggest banks have all suffered large PPI provisions that slashed their profits. HSBC has racked up a total PPI compensation bill of £1.7 billion, Lloyds Banking Group has booked a hefty £4.3 billion provision and Royal Bank of Scotland £1.3 billion.
Thursday’s announcement comes as Barclays fights to restore its battered reputation in the wake of a series of scandals, which include the mis-selling of interest rate swap arrangements.
The Libor affair meanwhile erupted in June when Barclays was fined £290 million by British and US regulators for attempted manipulation of European interbank rates between 2005 and 2009.
The scandal led to the resignations of three Barclays senior board members — chief executive Bob Diamond, chairman Marcus Agius and chief operating officer Jerry del Missier.
Diamond has been replaced by Barclays’ head of retail and business banking, Antony Jenkins, and Agius by financial industry veteran David Walker.
Jenkins has been quick to stamp his mark, announcing earlier this month a deal to buy the British online arm of Dutch bank ING, as he looks to refocus attention on Barclays’ retail arm and away from the investment unit in the wake of Libor.
The Libor fallout risks becoming much wider, with analysts claiming that Barclays could face massive lawsuits, since mortgage rates passed onto customers were influenced by Libor.
Although Barclays is the only bank to have been fined over Libor, it is understood that at least 15 lenders globally are being investigated for potential rate manipulation.
Britain’s government on Wednesday announced plans to make it a criminal offence to manipulate interbank Libor lending rates, backing the findings of a major report into the Barclays rate-rigging scandal.
London, Oct 18, 2012 (AFP)
