Comment: ‘Legacy’ resolution rumbles on at Barclays...

HAS breaking with the pack of banks and not joining the mass settlement of forex-rigging allegations with international regulators late last year benefited Barclays? Or has it just drawn out the agony? It is a difficult one to judge.

Martin Flanagan
Martin Flanagan

That settlement saw six banks, including HSBC and Royal Bank of Scotland, agree to pay £2.6 billion in fines to draw a line under the sorry episode.

Yesterday Barclays revealed in its first-quarter results for 2015 that it had raised its potential settlement for the industry scandal by an extra £800 million to a new total of £2bn. Chickenfeed, it isn’t.

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There is a feeling that Barclays is at least on the home straight in settling what the industry has quaintly termed a “legacy issue” (sounds so much better than misconduct and implies it is somehow distantly past!)

The bank didn’t join the mass settlement because it was still negotiating with the New York authorities and wanted once-and-for-all “closure” on the forex manipulation allegations through a simultaneous global settlement.

However, Barclays may have done so at the risk of losing the likely discount that the UK’s Financial Conduct Authority (FCA) normally gives to to industry wrongdoers who settle up early. And would it really have made a significant difference to the outcome of the negotiations with the American authorities if Barclays had done a deal on its home turf with the FCA first? Debatable, really.

It means things have just dragged on, and the latest £800m figure takes the gloss off what was a decent 9 per cent rise in underlying pre-tax profits at the bank in the first trading quarter.

In the wider shape of things, Barclays will be pleased that its investment banking arm had a better quarter, and that the underlying general profits picture looks sound.

As the self-confessed not-desperately-patient group chief executive Antony Jenkins has said, there will be no sacred cows in his effort to turn Barclays into a more streamlined, profitable banking animal.

Progress is being made, but as with other members of the Big Four in British high street banking, these “legacy” issues are likely to dog Barclays for some time yet and leave ugly bruises on the otherwise smooth surface of better underlying performance.

Stagecoach looks east for profits growth

The wheels on the transport group go round and round. Certainly for Perth-based Stagecoach in a perky trading update yesterday.

Stagecoach’s like-for-like rail revenues at the UK Rail business rose 9 per cent in the 48 weeks to 29 March. As importantly, the company has found nothing nasty lurking in the trainshed at the east coast rail franchise it took over on 1 March.

Stagecoach says that it expects the franchise to make a significant profit in the coming year, while revenues on the west coast line it runs with Virgin were also up a stocky 7.6 per cent in the latest period.

If the group can replicate on the east coast its strong – if initially rocky – performance on the west coast franchise it should be a money-spinner. Stagecoach’s track record suggests that is a decent possibility.

The UK bus operations, particularly in London, are washing their face. Only the US bus business looks a bit problematic in the short-term given the fall in fuel prices encouraging great use of the car.

But the general visibility ahead looks good.