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Barclays takes $1.2 billion charge as FX settlement looms

LONDON (Reuters) – Barclays took a 750 million pound ($1.2 billion) charge in the fourth quarter as it prepares to settle allegations its traders manipulated foreign exchange markets, overshadowing the bank’s efforts to slash costs and boost profits.

Past conduct problems continue to dog Barclays Chief Executive Antony Jenkins, but despite the burgeoning budget for litigation he accepted his first bonus since taking charge three years ago, helping to boost his total pay to 5.5 million pounds from 1.6 million in 2013.

The British bank said on Tuesday it had made an adjusted pretax profit of 5.5 billion pounds last year, up from a restated 4.9 billion in 2013 and above the average analyst forecast of 5.3 billion.

But including charges, provisions and restructuring costs of 1.2 billion pounds, pretax profit fell 21 percent to 2.3 billion.

The bank’s shares were the top fallers in a flat European banking sector, down almost 3 percent at 255.2 pence in early trade.

Barclays increased its litigation provision by 250 percent to 1.7 billion pounds, but Jenkins said the bank would make significant progress this year in resolving the forex probes.

“I regard the behavior at the center of these investigations as wholly incompatible with our values, and I share the frustration of colleagues and shareholders that matters like these continue to cast a shadow over our business,” he said.

Barclays pulled out of settling allegations its traders tried to rig foreign exchange benchmarks in a deal between U.S. and UK authorities and six rival banks in November because it had not reached a deal with New York’s regulator.

The bank said it wanted to settle the allegations with as many agencies as possible, as quickly as possible, but gave no further guidance on likely timing.

In addition to probes by Britain’s Financial Services Authority, the U.S. Commodity Futures Trading Commission and New York’s Department of Financial Services, the U.S. Department of Justice (DoJ) is in the final stages of its own inquiry.

PROBE OUTCOME

The bank said the outcome of the FX probes could violate a non-prosecution agreement (NPA) it has with the DoJ, which started in 2012 when it was fined for rigging Libor rates and runs until the end of June. It means if the DoJ finds any wrongdoing in FX activities it could come down harder on the bank.

Barclays is also being investigated by U.S. and UK authorities into the circumstances around its 2008 fundraisings with investors in Qatar and the bank said another unidentified regulator is also looking at a third-party relationship related to that event.

Barclays also set aside an extra 200 million pounds in the fourth quarter to compensate British customers who were mis-sold insurance products.

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.

The appointment of John McFarlane, chairman of insurer Aviva, as chairman of Barclays has raised expectations the downsizing of the investment bank could accelerate under his watch. At Aviva, McFarlane sold dozens of units in a revamp.

“The big issue for me is the new chairman’s agenda when he starts in the spring,” said one top-15 shareholder. “These results are less significant than any change to long-term strategy, especially a decision on whether the company remains a universal bank.”

Barclays said its investment bank had a good start to 2015 but 2014 was a year to forget, with pretax profit sliding a third due to a weak trading performance. Returns in the business were just 2.7 percent last year.

Elsewhere, pretax profit at Barclays’ personal and corporate banking division, its main profit driver, rose 29 percent, boosted by a drop in impairment charges.

The bank’s bonus pool dropped 22 percent to 1.86 billion pounds. Jenkins took an annual bonus of 1.1 million pounds and also a role-based allowance, used by banks due to bonus restrictions, of close to 1 million pounds.

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