* Provision for foreign exchange settlement now $3.2 bln
* Past problems blight CEO's turnaround efforts
* Q1 profit down 26 pct to 1.3 bln stg; underlying profit up9 pct
* Investment bank Q1 revenues up 2 pct on year, profits jump (Adds comments from finance director, analyst)
By Steve Slater and Matt Scuffham
LONDON, April 29 (Reuters) - Barclays set asideanother 800 million pounds ($1.2 billion) on Wednesday to coverpotential settlements for alleged foreign exchange manipulation,hitting profits and reflecting its struggle to put past problemsbehind it.
Barclays said it had now set aside 2.05 billion pounds ($3.2 billion) to cover any settlement, but offered only limitedclues on how soon a deal might come.
U.S. and British authorities are investigating theallegations. Barclays pulled out of a settlement between someauthorities and six rival banks in November because it had notreached a deal with New York's regulator.
"That (extra provision) reflects the further discussionswe've been having with a number of regulators and agenciesaround the world across multiple jurisdictions," FinanceDirector Tushar Morzaria told reporters.
Barclays wanted to settle the allegations with as manyagencies as possible in one go and Morzaria said the bank didnot regret pulling out of the earlier settlement.
New York's banking regulator has said it could reach a dealwith Barclays next month if it excluded a probe of the possiblerigging of rates through computer programs. It could takeseveral more months if that trading is included.
Barclays could settle next month with a host of regulators,and leave any settlement with New York's regulator on computertrading until a later date.
Barclays also set aside another 150 million pounds forcompensating customer mis-sold insurance products in Britain,which has now cost Barclays 5.4 billion pounds and all Britishbanks more than 26 billion.
Britain's four biggest banks have paid out 42 billion poundsin charges related to misconduct in the past five years, andface paying out another 19 billion pounds over the next twoyears, Standard & Poor's said this week.
PROVISION DRAGS
Under Chief Executive Antony Jenkins, Barclays has abandonedits ambition of being a Wall Street powerhouse, shrinking itsinvestment bank in favour of a return to its retail roots. He iscutting 19,000 jobs and shedding unwanted assets and businessesto cut costs and improve returns and its capital strength.
However, the cost of settling past misconduct issuescontinues to dog Barclays' attempt to turn itself around.
The bank reported a statutory pretax profit of 1.3 billionpounds, down 26 percent from a year ago.
Its underlying pretax profit, stripping out the provisionand other one-off items, was 1.8 billion pounds, up 9 percentfrom a year ago and just above the average forecast fromanalysts polled by the company.
Barclays shares dipped 0.6 percent by 1010 GMT, as analystssaid the results showed progress being made by the bank, but theforex provision was higher than expected.
"The increased FX provision, unaccompanied by furthernews-flow, is rather troubling," said Mike Trippitt, analyst atNumis Securities.
Return on equity, a key measure of profitability, was 10.9percent for the core business, as earnings from personal andcorporate banking rose 14 percent and underlying costs fell 7percent.
The investment bank's profits rose 37 percent on the year to675 million pounds, as revenues rose 2 percent to 2.2 billionpounds, in line with analysts' expectations and echoing a strongperformance by its U.S. rivals.
"The investment bank had a good Q1, representing aperformance which is more indicative of the potential of thefranchise following the repositioning undertaken last year,"Jenkins said. ($1 = 0.6515 pounds) (Editing by Keith Weir)
Barclays (BARC)
