LONDON — Problems continued to mount Friday at Barclays, as the British bank disclosed that it is facing lawsuits related to the rate-rigging scandal and that regulators are investigating the company’s financial director on a different matter.
The bank’s legal and regulatory burdens have been a continued source of financial pain.
Barclays reported Friday that net profit dropped 76 percent to $752 million during the first six months of the year after taking an accounting charge on its debt and a charge for inappropriately selling complex financial products to small businesses. Last month, Barclays and other banks settled with British regulators over the sale of interest-rate swaps.
On Friday, Barclays said that the Financial Services Authority, the British regulator, was looking into the actions of a number of current and former employees, including the finance director, Chris Lucas, over the disclosure of fees related to the bank’s capital-raising efforts in 2008. The potential issues revolve around agreements with the Qatar Investment Authority and Sumitomo Mitsui Banking Corp. of Japan, according to regulatory filings.
After the collapse of Lehman Brothers in 2008, the British bank tapped Middle Eastern investors for a combined $18.6 billion in two rounds of capital raising. Shareholders have voiced concerns that their rights were overlooked when Barclays turned to outside investors for fresh capital.
“Barclays considers that it satisfied its disclosure obligations and confirms that it will cooperate fully with the [Financial Services Authority’s] investigation,” the bank said in a statement.
The inquiry adds to the scrutiny surrounding the ratemanipulation case.
Last month, Barclays announced a $450 million settlement with U.S. and British authorities over the manipulation of benchmark rates, including the London interbank offered rate, or Libor. On Friday, Barclays disclosed that it was facing a number of class-action lawsuits in the United States related to such issues. One of the lawsuits cites unnamed current and former members of the bank’s board as defendants, according to a statement from the bank.
Barclays said it was “not practical” to estimate the costs related to the legal proceedings. Morgan Stanley analysts have said global banks may have to pay more than a combined $20 billion in penalties and fines related to the manipulation of the Libor.
“We are sorry for the issues that have emerged over recent weeks and recognize that we have disappointed our customers and shareholders,” Barclays’ chairman, Marcus Agius, who is to step down, said in a statement.
As it deals with the fallout, Barclays must also remake its management team. In the wake of the rate manipulation scandal, Robert-Diamond, the company’s former chief executive, and Jerry del Missier, the former chief operating officer, both resigned. Agius said on a conference call that the firm would appoint a new chairman before selecting its next chief executive.
Barclays has appointed Anthony Salz, vice chairman of the advisory firm Rothschild, to conduct a review into the British bank’s business practices.
Despite the bad news, by the close of trading in London, the bank’s shares had jumped nearly 9 percent.
Business, Pages 28 on 07/28/2012