Barclays' shares tumble due to fines fear
Fears over the potential for multi-billion pound fines and damages from the industry's rate-rigging scandal sent banks' shares tumbling today.
Barclays plunged as much as 17%, wiping about £4 billion from its market value, as concerns mounted that the £290 million fines imposed on the bank could be dwarfed by the cost of lawsuits.
The shockwaves were felt throughout the sector as speculation suggested the interbank lending rate scandal was set to engulf other British banks.
Royal Bank of Scotland dropped 12%, Lloyds Banking Group fell 7% and HSBC was 4% lower.
Sandy Chen, banking analyst at Cenkos Securities, said he was braced for billions of pounds in fines and damages across the sector.
He said: "The cost of lawsuits related to the Libor rate scandal will likely dwarf the £290 million fine imposed on Barclays - and since Royal Bank of Scotland, HSBC and Lloyds Banking Group have also been named in lawsuits, we expect they will also face significant fines and damages. We are pencilling in multi-year provisions that could run into the billions."
Mr Chen said recent disclosures on interest rate derivatives gave an indication of each bank's potential exposure to the rate scandal.
RBS reported £422 billion, HSBC reported $513 billion (£328 billion) and Lloyds recorded £43 billion, according to Mr Chen.
Analysts at Killik & Co agreed the interbank probe was likely to pull in other UK banks, but said Barclays should be able to withstand multibillion-pound damages.
They said: "Some estimates are that potential damages could run into the several billions of dollars, certainly damaging to Barclays but not too significant in the context of core tier one capital of £43 billion and annual net income over £3 billion."
The interbank lending investigation is the latest blow to the reputation - and shares - of Britain's banks, coming just days after RBS suffered an embarrassing computer crisis.
Last week most of the major players also suffered a ratings downgrade by agency Moody's and the sector is also reportedly facing a formal investigation over the sale of complex interest rate swaps to small and medium-sized businesses.
- 1 Jeremy Clarkson 'sees no problem' with his racist language on Top Gear, says BBC
- 2 'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
- 3 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 4 London restaurant 34 creates champagne glass modelled on Kate Moss’ left breast
- 5 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Bin bag full of cats' heads discovered near Manchester's Curry Mile
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
iJobs Money & Business
£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...
£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...
£30000 - £40000 per annum + benefits+bonus+package: Harrington Starr: C#.NET ...
£20000 - £30000 per annum + benefits+bonus+package: Harrington Starr: Junior D...