Barclays PLC share price up, Q3 profits rise despite provisions

Barclays PLC has set aside £500 million to cover costs associated with the ongoing investigations into manipulating the foreign exchange market as the company reported an increase in its third quarter profits.

Barclays is one of the six banks in negotiations with UK regulators over the accusations of manipulation of the currency market. The banks are expected to go into a joint settlement with the Financial Conduct Authority. The value of the agreement is estimated to be about £1.5 million and in mid-November, sources familiar with the situation have said.

Citigroup, UBS and JPMorgan, have also set provisions to cover any potential fines. Royal Bank of Scotland and HSBC are expected to also join the trend, as they report on Friday and Monday respectively.

Barclays reported a slight increase in pre-tax profit to £1.2 billion in the third quarter, compared to last year, despite a nearly 50% decline in pre-tax profit of its investment bank.

“The investment bank’s performance in the quarter was disappointing, but we have been able to offset that within the rebalanced group and still deliver good core performance.” said CEO Antony Jenkins.

Revenue increased 1% during Q3 as the company reaped the gains from its restructuring program, which resulted in almost 7% decrease in operating expenses.

The bank stated earnings per share of 2.4 pence compared to last years 3.8 pence. Cost-income ratio didnt change year-on-year and stayed 70%, worse than many competitors, but fell 12% compared to Q2 of 2014.

Common equity tier one ratio increased to 10.2% from 9.9% in Q2. The bank said it reached 3.5% leverage ratio a year earlier than expected.

On Friday Bank of England publishes new standards covering leverage ratio and it is expected to set a new minimum of between 4% and 5%, an increase from the previous 3%.

“I feel very confident that our ability to manage leverage is very good” said finance director Tushar Morzaria “Hopefully the momentum we have got here will stand us in good stead for whatever is announced tomorrow.”

Barclays stated asset gains of £461m from its acquisition of the US operations of Lehman Brothers. The £160m provision for mis-selling of interest rate swaps, that the company wrote back, also helped the company to achieve positive results.

Barclays PLC lost 1.12% on Wednesday and closed at GBX 220.50. On Thursday the stock gained 1.18% to trade at GBX 223.55 as of 13:38 GMT, marking a one-year decrease of 16.73%. The company is valued at £36.28 billion. According to the Finnacial Times, the 25 analysts offering-12 month price targets for Barclays have a median target of GBX 280.00, with a high estimate of GBX 365.00 and a low estimate of GBX 210.00. The median estimate represents a 27.0% increase from the last price of GBX 220.50.