Barclays and Standard Chartered shares dive in double blow for UK banking sector

Standard Chartered hit by new profit decline, Barclays facing allegations of “fraud and deceit”

Although "dark pools" are perfectly legal, Barclays is accused of giving a systematic advantage to high-frequency traders (PA)

Britain's banking sector received a double blow today as Standard Chartered said it expected first-half profits to be 20 per cent down on a year ago as shares in Barclays crashed on new allegations it had misled investors.

Standard Chartered’s under-fire chief executive Peter Sands said: “This has been a disappointing first half, with difficult trading conditions, particularly in financial markets.”

The bank also said the head of its financial markets business Lenny Feder will take a year’s sabbatical “for personal family reasons”.

He is the third top executive to leave in recent months. Significantly, if he returns he will not come back in the same role and Standard Chartered has launched the hunt for a full-time replacement.

Full-year earnings will also be less than Standard Chartered made last year.

Sands said: “As we navigate this difficult period, we remain focused on the drivers of value creation for our shareholders, continuing to build our franchise to make the most of the enormous opportunities in our markets.”

Standard Chartered shares plunged more than 6 per cent, 82.5p to 1175p. That is their lowest point for almost three years and will add to pressure from major investors, notably the Singapore sovereign wealth fund Temasek, which owns 18 per cent and has not backed the reappointment of bank directors in the past.

The bank is struggling in South Korea, India and Singapore, although it says China and Africa are doing well. It said just under two weeks ago it was selling two smaller businesses in South Korea to Japan’s J Trust as it seeks to cut losses and narrow operations.

Provisions against bad loans are also on the rise, with the bank warning these would be up in the “high teens”. Sands insisted the bank could get past its troubles. Shares in Barclays tumbled 5 per cent, or 12p, to 218p after it emerged it is being sued by New York’s attorney general over allegations of “fraud and deceit” in the dark pool trading system it ran for United States shares.

Eric Schneiderman claimed Barclays had grown its dark pool, LX, into one of the biggest off-exchange businesses on Wall Street “by telling investors they were diving into safe waters… Barclays’ dark pool was full of predators, there at Barclays’ invitation”.

Senator Carl Levin, who leads the Senate investigations committee, claimed the bank had put the interests of high-frequency traders ahead of investors’.

A Barclays spokesman said: “We take these allegations very seriously. Barclays has been cooperating with the New York attorney general and the SEC.”