Barclays Takes Extra $1.2B Hit For Potential Forex Settlements

(Reuters) - Barclays set aside another 800 million pounds ($1.2 billion) on Wednesday to cover potential settlements for alleged foreign exchange manipulation, hitting profits and reflecting its struggle to put past problems behind it.

Barclays said it had now set aside 2.05 billion pounds ($3.2 billion) to cover any settlement, after the extra provision to reflect "developments with certain authorities" since it last reported in March.

"We are working hard to expedite their settlement," Chief Executive Antony Jenkins said, but the bank did not provide any more details on any potential deal.

Barclays pulled out of a settlement between U.S. and British authorities and six rival banks in November because it had not reached a deal with New York's regulator. It said it wanted to settle the allegations with as many agencies as possible in one go.

New York's banking regulator said it could reach a deal with Barclays next month if it excluded a probe of the possible rigging of rates through computer programs. It could take several more months if that trading is included.

Barclays also set aside another 150 million pounds for compensating customer mis-sold insurance products in Britain, which has now cost Barclays 5.4 billion pounds and all British banks more than 26 billion.

PROVISION WEIGHS ON PROFIT

The cost of settling past misconduct issues continues to dog Barclays' attempt to turn around the bank, shift its focus away from investment banking and improve profitability.

The bank reported a statutory pretax profit of 1.3 billion pounds, down 26 percent from a year ago.

Its underlying pretax profit, stripping out the provision, was 1.8 billion pounds, up 9 percent from a year ago and just above the average forecast from analysts polled by the company.

Barclays shares were down 1.6 percent by 0705 GMT, as analysts said the results showed progress being made by the bank, but the forex provision was higher than expected.

Under Jenkins, Barclays has abandoned its ambition of being a Wall Street powerhouse, shrinking its investment bank in favor of a return to its retail roots. He is cutting 19,000 jobs and shedding unwanted assets and businesses to cut costs and improve returns and its capital strength.

Profits in the core business rose 14 percent from a year ago to 2.1 billion pounds, as earnings from personal and corporate banking rose 14 percent and underlying costs fell 7 percent. Return on equity, a key measure of profitability, was 10.9 percent for the core business.

The investment bank's profits rose 37 percent on the year to 675 million pounds, as revenues rose 2 percent on the year to 2.2 billion pounds, in line with analysts' expectations and echoing a strong performance by its U.S. rivals.

"The investment bank had a good Q1, representing a performance which is more indicative of the potential of the franchise following the repositioning undertaken last year," Jenkins said.