Barclays Plc is being investigated over whether it adequately disclosed fees it agreed to pay to the Qatar Investment Authority as it sought to raise money from investors including the sovereign wealth fund, according to a person with knowledge of the situation.
“The bank entered into an agreement for the provision of advisory services by Qatar Investment Authority to Barclays in the Middle East,” the lender said in a June 2008 statement detailing the fundraising. Britain’s Financial Services Authority is probing whether that disclosure was adequate, said the person, who declined to be identified because the terms of the investigation are private.
Barclays’s attempts to put its regulatory troubles behind it in the wake of last month’s record fine for manipulating Libor were complicated today by its disclosure that four current and former senior employees, including Finance Director Chris Lucas, were being probed by the FSA. The bank made the disclosure today as it reported first-half profit that beat analyst estimates.
“We are sorry for what has happened,” Chairman Marcus Agius said in a statement. “However, our leadership continues to focus on the delivery of our financial performance targets.”
Barclays stock jumped 8.7 percent to 167 pence today in London trading, the steepest increase since January. Pretax profit excluding one-time items rose 13 percent to 4.23 billion pounds ($6.6 billion), helped by fewer bad loans at the consumer unit and market-share gains at the investment bank. The result beat the 3.9 billion-pound median prediction of eight analysts surveyed by Bloomberg.
The shares are still about 13 percent below their June 26 close, the day before the record Libor fines were disclosed. Criticism from lawmakers and the Bank of England forced the resignation of the bank’s top three executives, including former Chief Executive Officer Robert Diamond. Barclays also said today it was the target of more lawsuits linked to claims it rigged the London interbank offered rate. The bank didn’t give an estimate of how much the suits may cost.
Barclays raised 7 billion pounds of capital from investors including the Abu Dhabi and Qatar sovereign wealth funds as the financial crisis worsened in 2008. The move allowed the bank to avoid a government bailout, unlike Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.
“The FSA is investigating the sufficiency of disclosure in relation to fees payable under certain commercial agreements and whether these may have related to Barclays capital raisings in June and November 2008,” the lender said in today’s statement.
Stephen Benzikie, an external spokesman for Qatar Holding, part of the Qatar Investment Authority, and Liam Parker, an FSA spokesman, declined to comment.
Barclays Chairman Marcus Agius said on a call with journalists today that Lucas’s name was deliberately disclosed by the bank as the information was potentially market-moving, and said investigations such as this occur “routinely.” He said the board retained “full confidence” in Lucas.
Roger Jenkins, former head of Barclays’s structured capital markets unit, received a bonus of more than 30 million pounds for helping to broker the investments, while Amanda Staveley of PCP Capital Partners was paid a 40 million-pound commission for her advice, the New York Times reported in November 2008.
“Barclays considers that it satisfied its disclosure obligations and confirms that it will cooperate fully with the FSA’s investigation,” the bank said today.
Spokesmen for Staveley and Jenkins weren’t immediately available to comment today.
Profit at the retail and business banking unit, overseen by Anthony Jenkins, climbed to 1.7 billion pounds from 1.5 billion pounds in the year-earlier period as provisions for bad loans and costs fell.
Total revenue at the investment bank increased 4 percent in the first half from the year-earlier period to 5 billion pounds, as revenue from fixed income, currency and commodities, known as FICC, jumped 11 percent. The division’s adjusted pretax profit rose to 2.6 billion pounds in the half from 2.4 billion pounds.
Rich Ricci, who runs the investment bank Diamond had built from the 1990s, said the business was gaining market share from rivals.
“In FICC, nobody has done better,” said Christopher Wheeler, a banking analyst at Mediobanca SpA. “The Lehman footprint is very powerful,” he said, referring to the London-based lender’s purchase of Lehman Brothers Holdings Inc.’s U.S. operations out of bankruptcy in 2008.
By contrast, Wall Street’s five biggest banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., posted the lowest first-half revenue since 2008 in the first half of 2012 as trading and deal-making dried up.
Total staff costs, including pay and bonuses, fell 8.4 percent to 5.15 billion pounds. The bank isn’t preparing any reductions in headcount, Ricci said.
Ricci is the most prominent Diamond lieutenant left at the bank after Chief Operating Officer Jerry Del Missier and Agius said they would step down after the 290 million-pound Libor fine. The bank has also faced criticism from lawmakers and has been forced to make provisions after regulators ordered it to compensate clients mis-sold payment-protection insurance as well as interest-rate hedging products.
Barclays today said it set aside an extra 450 million pounds during the half to compensate customers who were mis-sold derivatives. The lender has opened an internal review into its business practices, led by Anthony Salz, an executive vice chairman at Rothschild and former corporate lawyer.