Barclays risks investor ire with £1.5bn bonus pot

Barclays was accused of ignoring anger over bonuses and running “business as usual” as it revealed a £1.5bn (€1.8bn) pot for investment bankers yesterday.

A 32% cut to the bonus pool at Barclays Capital in 2011 was in line with a 32% fall in profits at the investment arm and did not signal the change required, major shareholder group the Association of British Insurers warned.

Providing more disclosure on bonuses in its annual results than before, the bank said the average bonus for staff at Barclays Capital was cut by 30% to £64,000 in 2011 while the group’s total bonus pool was down 25% at £2.2bn.

However, chief executive Bob Diamond refused to be drawn on questions about his own bonus, amid reports he could be in line to receive a £3m payout.

Robert Talbut, ABI investment committee chairman, said: “Whilst overall bonus levels at Barclays have been reduced for Barclays Capital, this reduction is only in line with the fall in profit before tax. This appears to be very close to business as usual.

“It is not the signal of the change required in order to improve the investment case.”

In response, Diamond said: “We stay close with our shareholders and they are very supportive.”

Addressing bonuses, he said: “We need to balance remaining competitive with being responsive to the public mood.”

Moves to cap and slash bonuses were not enough to appease unions and anti-poverty campaigners, as “serious questions exist about the moral backbone of those running the financial service sector”.

The results come after weeks of conflict over bankers’ bonuses, in which Royal Bank of Scotland chief Stephen Hester turned down his £963,000 bonus and Lloyds boss Antonio Horta-Osorio waived his payout.

Asked if Hester was right to waive his bonus, Diamond refused to comment.

Barclays, which reported pre-tax profits of £5.9bn for 2011, down 3% on the previous year, said that it introduced a cap on the cash part of bonuses for investment bankers at £65,000.

The results said annual incentives for executive directors and the eight highest paid senior executive officers were down 48% compared to 2010 on a like-for-like basis, though Diamond would not confirm how his own pay fitted into this decline.

But he confirmed Barclays would reveal the pay of the top eight highest paid staff at the bank in its annual report in mid-March.

The British retail and business banking division, where customers increased by 3% to 760,000, saw pre-tax profits increase 60% to £1.4bn, after stripping out the division’s £400m charge for mis-selling payment protection insurance.

The number of current accounts increased by 2% to 11.9 million, savings accounts were up 5% to 15.1 million, while mortgages increased 2% to 930,000.

Credit card business Barclaycard saw net operating income increase 21% to £2.8bn, while pre-tax profits were up 53% to £1.2bn, excluding thedivision’s £600m PPI hit.

Meanwhile, the bank slashed its bad debts by 33% to £3.8bn and cut its debt exposure to struggling eurozone countries Portugal, Italy, Ireland, Greece and Spain by 14% to £7.1bn.

Barclays shares were 3.5% higher after the results were published, but did dip into the red earlier in the session after it said it would hit its target to generate a return on equity of 13% later than 2013, after reporting a ratio of 6.6% last year.

BarCap saw pre-tax profits drop 32% to £2.96bn in 2011. The quarter-by-quarter breakdown at the division shows profits falling from £1.3bn in the first three months of the year to £267m in the fourth quarter.

Ian Gordon, analyst at Investec, said: “Bob Diamond’s track record is unrivalled but today is not his finest hour.”

He added: “It is BarCap’s dominance of the group and the weak external environment that render the resilient performance across retail and business banking almost irrelevant.”

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