Markets
BCS

Barclays Caught in a String of Probes, Troubles Ahead?

Troubles seem to be mounting for Barclays PLCBCS . While the company posted a loss for the fourth quarter of 2015 and announced several initiatives to further simplify its operations and enhance profitability, it is looking into suspected money laundering related to foreign exchange transactions in its South African operation, Absa Bank Limited.

According to Barclays' annual report, Absa Bank, the South African subsidiary of Barclays Africa Group Limited, "has identified potentially fraudulent activity by certain of its customers using import advance payments to effect foreign-exchange transfers from South Africa to beneficiary accounts located in Asia, the U.K., Europe and the U.S."

"The group is conducting a review of relevant activity, processes, systems and controls" and has informed regulators of the alleged wrongdoing, Barclays said.

Barclays also said the Portuguese Competition Authority is investigating whether the company infringed upon competition laws by exchanging information about retail credit products with 14 other banks over 11 years. Barclays said it is cooperating with the investigation.

The company has been involved in a number of scandals including involvement in foreign-exchange manipulation and Libor rigging. In order to recover, the company now wants to focus on its operations in Britain and the U.S.

As a result, Barclays intends to exit Africa with the sale of its 62.3% stake in Barclays Africa Group Limited (BAGL) over the next 2-3 years. With the completion of stake sale in BAGL and continued run-off in Barclays Non-Core segment, the company will be significantly simplified.

According to a Bloomberg report, Barclays Chairman John McFarlane said in a letter to shareholders that "excessive" regulatory fines had forced the bank to shrink its operations, reducing its support for the U.K. economy.

In another report by Reuters, Barclays is said to face a proposed class-action lawsuit, ordered by U.S. District Judge Victor Marrero in Manhattan, in which a California water utility accused the company of manipulating the electricity markets in the western U.S., resulting in overpayment by buyers.

In 2013, Barclays was fined $435 million by the U.S. Federal Energy Regulatory Commission (FERC) for allegedly manipulating electricity prices in California and other western U.S. states from November 2006 to December 2008.

Merced Irrigation District accused Barclays of similar breaches and Marrero said the allegations "plainly suggest Barclays' conduct was intended to artificially inflate or deflate market prices and constrain the market for other buyers and sellers of electricity."

While Merced can pursue two claims, two other claims raised by it were rejected by the judge.

Other global banks like JPMorgan Chase & Co. JPM and Deutsche Bank AG DB have also been under the regulatory scanner over similar allegations.

Currently, Barclays holds a Zacks Rank #5 (Strong Sell). A better-ranked foreign bank is Banco Bradesco S.A. BBD , which carries a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

BARCLAY PLC-ADR (BCS): Free Stock Analysis Report

DEUTSCHE BK AG (DB): Free Stock Analysis Report

BANCO BRADESCO (BBD): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

BCS BBD DB JPM

Other Topics

Stocks

Latest Markets Videos