* Q2 adjusted profit 1.7 bln stg, beats forecasts
* Cost cutting, bad debts better than analysts expected
* Investment bank Q2 revenue down 16 pct
* Non-prosecution agreement with U.S. DoJ extended
* Bank on track to cut 14,000 jobs this year
* Shares up 4 pct
(Writes through with CEO comments, detail)
By Steve Slater and Matt Scuffham
LONDON, July 30 Barclays Plc said its
underlying profits fell 8 percent in the second quarter as
subdued market activity and the British bank's attempts to crack
down on high-risk trading took a toll on investment banking
Chief Executive Antony Jenkins, under pressure to lift
profitability and stamp out wrongdoing, said on Wednesday a
challenging operating environment and the legacy of past
misconduct continued to dog the bank.
But he said he was ahead of target in cutting costs and
hiving off assets that Barclays no longer wants.
Barclays has been in the crosshairs of regulators determined
to stamp out the culture of irresponsible risk taking and greed
blamed for bringing global finance to its knees in 2008-9.
The bank avoided a state bailout during the crisis by
turning to Middle Eastern investors to bolster its capital. It
was the first bank to be fined for attempted manipulation of
Libor benchmark interest rates.
"We can now see the new Barclays starting to emerge,"
Jenkins told analysts.
Barclays has stopped most of its physical commodities
trading and axed many emerging markets and interest-rate trading
products, among other reforms.
It said it had cut 5,000 jobs this year, leaving it with
fewer staff than at any time since 2007. It aims to cut a total
of 14,000 positions in 2014, including 2,500 in investment
Barclays shares were up 4.4 percent at 227.9 pence by 1100
GMT, the top performing European bank stock.
"Investment banking revenues were better than feared, the
balance sheet is strengthening and the non-core run-off is
progressing well," said Mike Trippitt, an analyst at Numis, who
rates the stock a 'buy'.
Barclays said the U.S. Department of Justice had requested
an extension to a non-prosecution agreement (NPA) that was due
to expire last month, to allow it to continue to investigate
possible misconduct in foreign exchange trading. The NPA was put
in place after the bank was fined $450 million for the alleged
rigging of Libor interest rates, and means if the DOJ finds any
wrongdoing in FX activities it could come down harder on the
The bank also set aside a further 900 million pounds ($1.5
billion) to compensate customers mis-sold loan insurance, taking
its bill for the scandal to 4.85 billion. It said the rise was
mainly due to a significant increase in claims dating back to
before 2005, driven by claims management companies.
Jenkins said the bank would accept sanctions when it is
shown to be in the wrong, but said where its actions "are
mischaracterised or we are wrongly accused we will defend
That was a reference to a lawsuit filed last month by New
York's attorney general alleging the bank lied to clients and
its electronic trading platform - or so-called "dark pool" -
gave an unfair advantage to high speed traders.
Barclays last week said the lawsuit should be thrown out as
the complaint did not identify any fraud and took marketing
material out of context.
WEAK INVESTMENT BANK
Barclays reported adjusted profits in the three months to
the end of June fell to 1.7 billion pounds ($2.9 billion) from
1.8 billion a year ago. First-half earnings were 3.3 billion,
down 7 percent on the year but above the average forecast of 3
billion from analysts polled by the company.
The bank's shares are down 19 percent this year, the third
worst performer among Europe's top 47 banks, which are
on average up 1 percent. Barclays shares trade at 0.6 times book
value, well below the average of 1 times for its European peers,
according to Reuters data.
Its valuation is being depressed by the threat of more
litigation costs, weak returns and its still hefty reliance on
the investment bank, which is seen as more volatile than retail
and corporate banking.
Revenues fell 16 percent at the investment bank, where
business has been hit by a decline in fixed-income trading and
tougher regulation and the impact of the strong British pound.
Revenue from credit and macro products in the second quarter
was down 17 percent, a steeper drop than at U.S. rivals, but
advisory revenues jumped 35 percent, outperforming peers.
The bank said its return on equity (RoE) was 6.5 percent in
the first half of the year, down from 7.8 percent a year ago and
well below Jenkins' target of 11 percent.
It said RoE in the core business was 11 percent and the
"drag" from the run-down of non-core assets had reduced and it
was running down those assets faster than expected.
It set up a "bad bank" two months ago to house assets it
does not want - including its retail banking operations in
Italy, France, Spain and Portugal - and it said the unit had
shed 85 billion pounds of assets to leave 315 billion.
The bank reported a stronger-than-expected leverage ratio of
3.4 percent, up from 3 percent at the start of the year, and
said it was on track to get that above 4 percent by 2016.
($1 = 0.5902 British pounds)
(Editing by Tom Pfeiffer)