Barclays' HK$12b provision for mis-selling clients

PUBLISHED : Wednesday, 06 February, 2013, 12:00am
UPDATED : Wednesday, 06 February, 2013, 4:43am

Barclays, Britain's second-largest bank by assets, will set aside an additional £1 billion (HK$12.2 billion) to cover mis-selling of payment-protection insurance and other products.

The bank said yesterday it would reserve £600 million for redress, bringing provisions to compensate customers who were sold the insurance on loans unnecessarily or without their knowledge to £2.6 billion.

It also increased provisions for interest-rate hedging products by £400 million as of the end of last year, bringing the total to £850 million, the highest for any British bank.

Barclays has been under intense scrutiny since it was fined a record £290 million in June for attempting to manipulate the London interbank offered rate and other benchmark interest rates, with the lender's three top executives, including former chief Bob Diamond, departing. Antony Jenkins, who ran the consumer bank responsible for the loan insurance sales from November 2009 until his promotion to chief executive in August, said this month he would not take a bonus for last year after a series of regulatory missteps including its Libor fine.

"This appears to be part of Antony Jenkins' new approach," said Simon Willis, an analyst at Daniel Stewart Securities. "It may be partly designed to draw any sting from surprises on results day."

Barclays will report full-year results next week, with Jenkins updating investors on the bank's strategy the same day. The stock rose 2 per cent to 335.20 pence early yesterday. It has gained 12 per cent this year, giving the firm a market value of £35.7 billion.

Bank of England governor Mervyn King signalled in November last year that lenders might need to make bigger provisions for future loan losses and the cost of regulatory fines and customer redress. He asked regulators to report next month on how banks should comply.

Barclays said the additional charges for the products followed a "higher-than-anticipated response rate to pro-active mailings" in the fourth quarter, with £1.6 billion in provisions used by the end of the year.

The "main review and redress exercise will commence shortly and the appropriate provision level will be kept under ongoing review as it progresses", it said, commenting on further provisions for swap mis-selling.