Barclays cuts bonus pool but investors say it’s too little too late

Published on Saturday 11 February 2012 00:00

BARCLAYS yesterday slashed its investment banking bonus pool by nearly a third as profits fell, but the group was slammed by one of Britain’s most powerful investor bodies for not going far enough.

Amid mounting political and public pressure on bonuses, the bank – the first of Britain’s big four to report annual results – said the bonus pool for Barclays Capital was cut by 32 per cent to some £1.5 billion.

That mirrored a slump in profits at the investment bank to £2.9bn from £4.4bn as the eurozone debt crisis hit bond trading, giving an average bonus to BarCap’s staff of £64,000. It will be capped at that level for 2012. The total Barclays bonus pool was down 25 per cent at £2.2bn.

Bob Diamond, group chief executive and former boss of the investment banking arm, said of banking “compensation”: “We need to balance remaining competitive with being responsible to the public mood.”

But Robert Talbut, chairman of the Association of British Insurers’ (ABI) investment committee, representing many of the biggest investors in the stock market, claimed Barclays’ action was insufficient and sent out the wrong signals.

“ABI members have asked all UK listed banks for a shift in the balance between maintaining capital strength, delivering returns to shareholders and reward to employees,” Talbut 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.”

Diamond sidestepped the criticism at a news conference, saying the bank enjoyed “constructive” relations with the ABI.

He refused to be drawn on his own pay-out, amid reports he could be in line to receive more than £11m in short-term and long-term bonuses, plus salary.

Barclays said that annual incentives for executive directors and the eight highest-paid senior non-board executives were down 48 per cent on 2010.

It came as the bank said overall pre-tax profits fell 3 per cent to £5.9bn in 2011 from £6.1bn the previous year. Analysts noted that the group’s key return on equity slipped to 5.8 per cent last year from 7.2 per cent in 2010, and less than half the new target of 13 per cent by 2013 Diamond unveiled last year.

He admitted that although 13 per cent “remains absolutely the right target and is very achievable, we may not achieve it in 2013 given the impact of the external environment”.

Barclays’ UK retail and business banking arm had a good year, with underlying profits up 60 per cent to £1.4bn excluding a £400m provision for mis-selling payment protection insurance.

Barclaycard’s profits leapt 53 per cent to top £1bn for the first time, while Barclays Corporate returned to the black with a profit of £126m.

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