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Barclays swings to Q3 loss after booking extra £1.4B PPI provision

Barclays PLC swung to a loss in the third quarter from a year-ago profit, as litigation and conduct costs swelled year over year to £1.57 billion from £105 million, largely due to hefty provisions for missold payment protection insurance claims.

The British banking group reported a third-quarter attributable loss of £292 million, compared to a profit of £1.05 billion in the same period a year ago. Loss per share for the quarter was 1.7 pence, compared to EPS of 6.1 pence in the third quarter of 2018.

The results included an additional £1.4 billion provision for PPI, which the bank attributed to an "exceptional" level of claims and information requests from customers and claims management firms ahead of the U.K. Financial Conduct Authority's Aug. 29 deadline for filing claims. Barclays has used £350 million of the amount in the third quarter, noting that it has recognized £11 billion of cumulative provisions for PPI to date.

Excluding litigation and conduct expenses, Barclays booked an attributable profit of £1.23 billion for the period, up from £1.14 billion a year earlier.

Net interest income rose on a yearly basis to £2.45 billion from £2.39 billion, while net fee, commission and other income increased to £3.10 billion from £2.74 billion.

Credit impairment charges and other provisions amounted to £461 million in the third quarter, up from the year-ago £254 million.

The group's return on average tangible shareholders' equity was negative 2.4%, compared to 9.4% in the third quarter of 2018.

For nine months ended Sept. 30, Barclays' after-tax profit attributable to equity holders of the parent increased year over year to £1.78 billion from £1.61 billion. EPS for the period rose to 10.4 pence from 9.4 pence a year ago.

The bank's common equity Tier 1 ratio stood at 13.4% at the end of September, up from 13.2% as of the end of 2018 and Sept. 30, 2018. Following discussions with regulators, Barclays said it revised its target CET1 ratio to approximately 13.5% after it removed the operational risk-weighted assets floor that it previously applied to account for such assets more in line with British peers.

CEO James Staley said that despite the impact of the PPI provision on profitability, the group's 13.4% CET1 ratio remains within its new target.

Barclays noted that it continues to target a return on tangible equity of more than 9% for 2019 and above 10% in 2020, but acknowledged that reaching the targets would be more challenging given global macroeconomic uncertainty and the current low interest rate environment.