The cost of the payment protection insurance scandal has topped £40bn after Barclays took another £600m hit to pay compensation to customers who were mis-sold the product.
The extra provision, announced as the bank reported a 10% fall in nine-month profits, takes Barclays’ costs to £8.4bn. Data compiled by the thinkthank New City Agenda shows that this top up for Barclays has pushed the total provisions incurred by the industry to £40.2bn. Lloyds Banking Group makes up £17bn of that total bill for PPI mis-selling scandal tops £40bn
Barclays said its extra provision was caused by the cutoff point of June 2019 for claims, set by the Financial Conduct Authority. It added: “We will continue to review the adequacy of the provision levels in respect of the FCA’s proposals, which remain subject to consultation.” In the midst of an overhaul being led by chief executive Jes Staley, the bank insisted it was “open for business” after the Brexit vote. But Staley admitted he was considering what changes it might need to make to its business as the UK made plans to leave the EU.
Barclays chief executive Jes Staley insisted Barclays was ‘open for business’. Staley said: “We are looking at our options. We will take incremental steps. We are engaged in active discussions with the British government. Our desire is to stay as fully invested in the UK as we can.”
This week, the Observer reported a warning from Anthony Browne, the chief executive of the British Bankers Association, that bosses had their hands “quivering over the relocate button”. Staley said while Barclays was looking at its options, “I wouldn’t say our finger is quivering. Our intention is to stay as much invested in London as we can. We are a British bank.” In July, Staley said operations might need to be strengthened in Ireland if the government did not clinch a passport deal that gave access to the remaining 27 EU countries.
The bank’s shares were the biggest risers in the FTSE 100, despite the extra charge for PPI and the £150m hit to cover costs incurred in reducing office space because of job cuts. The bank would not disclose which office was affected, but it has been reported that it has been in talks about leasing space in Canary Wharf to the government. The shares closed 4.5% higher, at 190p, after the bank reported that its profits fell to £2.9bn in the nine months to September, triggered by a loss in the non-core division that houses the operations Staley has earmarked for sale or closure.
Staley joined Barclays in December and set about selling off the bank’s operations in Africa. He said: “The growing momentum in attaining our strategic goals means we can feel optimistic of our prospects of completing the restructuring of Barclays – a restructuring to a simplified, transatlantic, consumer, corporate and investment bank with the capacity to deliver sustainable, high-quality returns for shareholders. This quarter has seen us take another important stride toward that state.” The vote to leave the EU had been a political shock, Staley said, but consumers had recovered swiftly.
“The referendum was a political shock, not an economic shock. I think consumers have recovered from that, but there has been an impact in the currency, which directly impacts the consumer,” said Staley. Barclays said it remained in discussions with the US Department of Justice over a settlement related to mortgage bond mis-selling.