Posts tagged "Barclays Capital"

Barclays: meet the new boss | Editorial

Antony Jenkins is a refreshingly boring banker, but his appointment cannot draw a line under the bank’s troubles

It’s easy to see what the choice of a new head of Barclays is supposed to signal. Antony Jenkins is a refreshingly boring banker; a surprisingly welcome breath of muggy air after all the turbulence at the high-street institution long since captured by investment bankers.

A retail-banking veteran, Mr Jenkins’s background is in branches and Barclaycard, not mortgage derivatives and misreporting Libor. Where his predecessor, Master of the Universe Bob Diamond, last year took £17m from the bank in pay, shares and perks – not to mention £5.7m to cover his tax bill – Mr Jenkins will receive a comparatively modest £8.6m (provided he meets demanding targets – and that your comparison is solely with other millionaire bankers). Even while the charge sheet for Barclays is still growing – see this week’s revelation that it is now under investigation by the Serious Fraud Office – Mr Jenkins’ arrival is intended to draw a line under all the recent trouble, by indicating that a new retail broom will sweep away the work-hard-pay-hard investment-banking culture.

To which, all one can say is: nice try but no executive cigar. Barclays is probably Britain’s most troubled financial institution. The past year alone has seen it hit by the PPI mis-selling scandal, the revelation of force-feeding small businesses unsuitable and hugely costly financial products, the censure of the Treasury over corporate tax-dodging, the Libor scandal, and now an SFO investigation. Many of these cases are still snowballing; the news that Barclays and others fixed money market rates has prompted full-scale investigations by a phalanx of official bodies (including the FBI) and the threat of lawsuits from American cities, brokerages and investors. No number of nice guys will be able to fend off that lot. Conversely, blaming all this misbehaviour on the former boss, no matter how outsize his pay and personality, doesn’t wash. The big issue surely is the structure of Barclays.

The safe high-street bank Mr Jenkins came through is now welded onto a huge trading arm, Barclays Capital, which now has £1.8 trillion in gross credit risk – more than the UK’s annual GDP. Much of that risk has been reduced, but the bulk of it is in derivatives tied to Britain and Europe, which are the sickest parts of the world economy. In essence, Barclays has used its taxpayer backing to rack up a giant credit risk that could sink the entire country. By promoting a retail banker to front a giant trading operation, Barclays would like ministers and taxpayers to believe that it’s not so bad, or so risky. This is an unconvincing plea. Far better for the government to demand Barclays splits itself in two. Taxpayers should not be used to guarantee and subsidise a bank’s trading operation; nor should they be put on the hook for when it all goes wrong.


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Posted by admin - August 31, 2012 at 08:26

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MPs tell Barclays to stop fundraising for Mitt Romney

Bank at centre of Libor-setting scandal says it is non-partisan and donations are made by employees in a personal capacity

Barclays has privately distanced itself from its bankers’ donations to Mitt Romney, the US Republican presidential candidate, after its executives were accused in parliament of fundraising for political candidates instead of working to rebuild the public’s trust in the wake of the Libor-setting scandal.

Executives at Barclays have donated over $1m to Romney’s presidential campaign and will hand over more money on Thursday night at an exclusive fundraising dinner in a secret Mayfair location, where tickets cost between $50,000 and $75,000.

Romney arrived in the UK on Wednesday for a series of meetings with David Cameron and other political figures before attending two fundraising events and the Olympics this weekend.

An early-day motion (EDM) signed by 11 MPs last week demanded the bank and its directors stop working to bolster Romney’s election campaign war chest and concentrate on repairing confidence and trust in the banking system instead.

But in a letter to the signatories of the motion, Cyrus Ardalan, a vice-chairman of Barclays and head of the UK and European government relations, said the bank was not a supporter of the presidential hopeful.

“I … would like to clarify that all political activity undertaken by Barclays’ US employees, including personal fundraising for specific candidates, is done so in a personal capacity, and not on behalf of Barclays,” he wrote.

“Barclays is politically non-partisan, makes no political donations nor seeks to influence the political activities of its employees.”

The EDM, whose primary sponsor was Grahame Morris MP, criticised the fact that the recently departed Barclays chief executive, Bob Diamond, and other existing senior Barclays executives have played a prominent role in fundraising efforts for the Romney campaign.

The dinner was due to be co-hosted by Diamond but he pulled out after resigning as chief executive in the wake of the Libor rate-fixing scandal. Diamond has been replaced by Patrick Durkin, the managing director of Barclays Capital, the bank’s “casino banking” investment arm.

Diamond, along with Cameron, was a very public supporter of John McCain, the last Republican candidate for the presidency, when he ran against Barack Obama in 2008. Romney earned a $50,000 speaking fee from Barclays in 2011.

MPs including Jim Cunningham, Mark Durkan, Margaret Richie and John McDonnell raised concerns that at least 15 of Barclays Capital’s most senior bankers based in the US have donated the maximum allowable individual donation per election to the Romney campaign.

They also criticised the fact that Durkin has already reportedly raised over $1m for the Romney campaign.

Other hosts of the event, which is being held at a secret location understood to be a five-star hotel in central London, include Dwight Poler, the managing director of the European arm of Bain Capital, the private equity house founded by Romney, and Eric Varvel, the chief executive of Credit Suisse’s investment banking arm.

Among 47 named co-hosts are Raj Bhattacharyya, a managing director at Deutsche Bank, Karl Peterson, the European boss of private equity firm TPG Capital. Also present will be Woody Johnson, the owner of American football team the New York Jets and a great-grandson of the founder of Johnson & Johnson.

Guests who can’t quite stretch to the $50,000-$75,000 required for dinner with Romney are invited to a 5pm reception, which costs from $2,500 a head.

On Friday Romney will also attend the London 2012 opening ceremony.

The pro-Barack Obama super PAC Priorities USA Action will use his visit to the Olympics to release a new advert attacking Romney’s record outsourcing jobs and moving millions of dollars of his wealth to offshore tax havens.

“We know the Swiss have a special place in Mitt Romney’s wallet, er, heart,” the voiceover of the advert says as the Swiss athletes march into the games with Romney shown waving. “He kept millions in Swiss banks. Those Swiss sure know how to keep a secret.”

The advert ends with the line: “You gotta say this about Mitt Romney. He sure knows how to go for the gold – for himself.”

While in London, Romney will also meet Cameron, Nick Clegg, George Osborne and Ed Miliband. It is the second time Romney has visited London to raise cash following a meeting with “a few friends” in Mayfair last summer.

London’s role in global finance has made it a key fundraising target in presidential elections. Obama, who is trailing Romney in the race for cash, held a similar fundraising party in the capital before the 2008 election.

Romney’s event is being organised by Scott Preen, a London company that specialises in high-profile political fundraising parties. The company, run by Frances Penn, has previously organised lavish events for Romney and McCain, who ran against Obama in the 2008 election.

Scott Preen, whose clients include Bulgari, Dior and the National Bank of Greece, has previously held receptions at Spencer House, the 18th-century mansion owned by Lord Rothschild. The company declined to comment.


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Posted by admin - July 26, 2012 at 08:45

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Bob Diamond: five more things we will learn

The Treasury select committee is set for interesting testimony from Paul Tucker and Marcus Agius

1. Paul Tucker’s testimony will be more interesting. The biggest decision Bob Diamond has to make in the next few weeks is whether to accept the £22m or so that the board (probably) will offer him as a pay-off. Tucker, on the other hand, is fighting to become the next governor of the Bank of England. He won’t succeed if his evidence, like Diamond’s, is judged to be implausible. That means giving a full account of not only the Diamond memo, but also why regulators appear to have tolerated the open secret that the Libor numbers couldn’t be trusted in 2008.

2. The Treasury select committee has form in flunking it. Remember the encounter with the private equity barons in 2007? It was even more embarrassing than yesterday’s hearing. Highly-coached businessmen versus under-prepared MPs led to misunderstandings and frustration on both sides. Part of the problem is the format – every member gets his or her 10 minutes and they all go for different angles. Better for all to agree in advance on the questions that must be posed – then insist on getting the answers. If they’re incapable of doing the latter, hire a QC to do the interrogation. The MPs’ timidity was astonishing. Come on, if you don’t like Diamond addressing you by your first name, just tell him, don’t tweet your complaint. It wouldn’t happen on a US senate committee inquiry.

3. One of Diamond’s seemingly sensible remarks was that Barclays was unfairly beaten up for being the first in line in the industry-wide Libor investigation – a “first move disadvantage” as committee chairman Andrew Tyrie put it. But was Barclays first solely because it agreed to co-operate? We learned yesterday that the Financial Services Authority had had concerns about the Barclays’ culture for a long time. Was this also a factor? Did the bank choose to head the queue or was it pushed there? The FSA would do well to clear up this point before the idea becomes entrenched that a chief executive who agrees to co-operate in an industry-wide investigation is most in danger of losing his job.

4. Bad deeds have been exposed at two UK companies this week. In the case of GlaxoSmithKline, fined $3bn after admitting bribing doctors and encouraging the prescription of unsuitable antidepressants to children, the wrongdoing was exposed partly by the good work of whistleblowers. Would it be helpful to offer financial inducements to would-be whistleblowers in banks’ trading rooms? In the Barclays’ case, somebody might have been tempted to spill the beans to regulators in return for payment worth a couple of years’ bonuses. Of course, such a system would rely on the regulators being awake, but bonuses for incriminating evidence sounds an interesting avenue.

5. Marcus Agius, Barclays chairman since January 2007, is due to appear before the committee next Tuesday. But let’s also hear from a wide selection of the famous names who served as non-executive directors on the board in the 2005-09 period. How did they view the culture of Barclays and Barclays Capital at the time? What did they investigate? Did they get the information they requested? Did they worry that the organisation was being swamped by investment bankers? The answers of supposedly independent non-executives ought to be more revealing than Diamond’s tiresome repetitions of his love for the organisation.


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Posted by admin - July 5, 2012 at 14:02

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Barclays crisis: MPs call for Leveson-style inquiry

Political mood towards banks turns increasingly hostile as George Osborne blames Labour for regulatory failures

MPs were drawing parallels between the apparent collapse in ethical values at Barclays and the controversy that has engulfed News International, with some suggesting there may need to be a Leveson-style public inquiry into the bank’s attempts to manipulate the Libor benchmark used to set loan and savings rates.

Mark Garnier, a Conservative Treasury select committee member and one of the MPs due to cross-examine Barclays’ chief executive Bob Diamond about his personal knowledge of the scandal, said: “I think we may be heading towards something like Leveson.”

He added: “I think Bob Diamond has some incredibly important questions to answer, not least because he was the head of Barclays Capital while this was going on, but also he is a derivatives expert – so he should know what is going on.”

Chris Leslie, the shadow Treasury minister, also suggested a public inquiry might be necessary. “If this goes on, and it emerges this had spread to other banks and internationally, there is a very strong case for a specific inquiry into how there was systemic manipulation and rigging of key market statistics.”

The parallels with Leveson were apparent during a Commons statement as MPs repeatedly asked the chancellor, George Osborne, what the regulators knew, whether warnings from within Barclays were picked up by the Financial Services Authority and if the government’s advocacy of light-touch regulation stemmed from its excessive closeness to the City.

The political mood towards the banks is increasingly hostile. Liberal Democrat MP John Thurso claimed the banks were in “a sewer of systemically amoral dishonesty”, while the former Labour business minister Pat McFadden claimed the banks needed a cathartic clause IV moment – a collective admission of moral failure.

The Treasury select committee chairman, Andrew Tyrie, spoke of a collapse of trust between MPs and the banks. Osborne repeatedly pointed out that the new Barclays scandal was a Labour regulatory failure.

The chancellor told the Commons that “the email exchanges between derivative traders and the Libor submitters read like an epitaph to an age of irresponsibility”. He pointed out that the zenith of this age was 2005, 2006 and 2007, part of the period when Ed Balls, an advocate of light-touch regulation, was City minister.

Osborne claimed the Labour government had been “literally clueless about what was going on”, adding: “The Labour party’s trouble is that it is led by the cheerleaders for the age of irresponsibility, but they have yet to say sorry for it.”

He added: “Shockingly, the scope of the FSA’s criminal powers, granted by the previous government, does not extend to being able to impose criminal sanctions for manipulation of Libor.”

Osborne’s assault on the absence of criminal sanctions was helped by an own goal by Lord Tunnicliffe, the Labour Treasury spokesman. Referring to criminal sanctions, he told peers: “It is fair to say that you cannot find them in the current legislation, and yes, OK, it is our fault – I hope my leaders do not hear me say that.

“One of the reasons is that it is extraordinarily difficult to bring criminal sanctions into an area such as this where the criminal burden of proof is so high.”


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Posted by admin - June 28, 2012 at 22:37

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Government meets borrowing target

Public sector net borrowing, excluding effect of banking bailouts, rose to £18.17bn last month, from £17.95bn a year ago

The British government borrowed more than expected last month, but still managed to meet its target for the financial year.

City economists said the high March shortfall highlighted the pressure on the chancellor to stick to his austerity measures, especially as the credit rating agencies Moody’s and Fitch have put the UK’s AAA-rating on negative outlook.

But Labour warned that George Osborne risked choking off the recovery, with falling tax receipts last month underlining the fragile state of the economy.

Public sector net borrowing, excluding the effect of the banking bailouts – the government’s preferred measure – rose to £18.2bn last month, from £18bn a year ago, according to the Office for National Statistics. This was worse than the £16bn predicted by City economists. Tax receipts fell and government departments went on an unusually large spending splurge ahead of the end of the fiscal year.

However, downward revisions to previous months (the February shortfall was trimmed to £12.2bn from the previously reported £15.2bn) meant Osborne met his full-year target. The government borrowed £126bn over the 2011/12 financial year, bang in line with the Office for Budget Responsibility’s forecast in the March budget, and far below the £136.8bn deficit run up last year.

“These figures show that last year George Osborne borrowed £9bn more than he planned to at the time of his spending review,” said Rachel Reeves, Labour’s shadow chief secretary to the Treasury. “There do need to be tough decisions on tax, spending and pay. But by choking off the recovery, pushing up unemployment and so borrowing billions more to pay for economic failure, cutting spending and raising taxes too far and too fast has backfired. And this government’s pledge to balance the books by 2015 is now in tatters.”

As a percentage of GDP, borrowing fell to 8.3% in 2011/12 from 9.3% in 2010/11, also in line with government forecasts. The chancellor has vowed to largely eliminate Britain’s budget deficit in coming years. It was at a record 11% when the coalition government took power in 2010.

Britain’s net debt climbed to £1.02tn in March, equivalent to 66% of GDP, the highest since records began in 1993.

When the government set out its deficit reduction plans in 2010, it pencilled in tax increases worth £29bn and spending cuts worth £83bn over the next five years. However, Blerina Uci at Barclays Capital said the five-year plan had turned into a seven-year plan: “The OBR has lowered its GDP growth forecast for 2011-12 to 0.5% from 2.4% and its 2012-13 forecast to 1% from 2.9%. This has led the government to slow the pace of fiscal consolidation in the medium term. The government has eased both the pace of spending cuts and the pace of tax increases – the net effect has, however, been for fiscal consolidation to last for longer and to be even more severe in the long run (cumulative spending cuts have increased to £126bn).”

Tax receipts were disappointing in March, which suggests that weaker economic activity took its toll. Income and capital gains tax receipts were down by 3.6% year-on-year, while the VAT take fell 1%.

“With the economic recovery continuing to stutter, we think it will become increasingly difficult for the government to meet its ambitious deficit reduction plans in the coming fiscal year,” said Samuel Tombs, UK economist at Capital Economics.


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Posted by admin - April 25, 2012 at 08:19

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Government meets borrowing target for year

Public sector net borrowing, excluding effect of banking bailouts, rose to £18.17bn last month, from £17.95bn a year ago

The British government borrowed more than expected last month, but still managed to meet its target for the financial year.

City economists said the high March shortfall highlighted the pressure on the chancellor to stick to his austerity measures, especially as the credit rating agencies Moody’s and Fitch have put the UK’s AAA-rating on negative outlook.

But Labour warned that George Osborne risked choking off the recovery, with falling tax receipts last month underlining the fragile state of the economy.

Public sector net borrowing, excluding the effect of the banking bailouts – the government’s preferred measure – rose to £18.2bn last month, from £18bn a year ago, according to the Office for National Statistics. This was worse than the £16bn predicted by City economists. Tax receipts fell and government departments went on an unusually large spending splurge ahead of the end of the fiscal year.

However, downward revisions to previous months (the February shortfall was trimmed to £12.2bn from the previously reported £15.2bn) meant Osborne met his full-year target. The government borrowed £126bn over the 2011/12 financial year, bang in line with the Office for Budget Responsibility’s forecast in the March budget, and far below the £136.8bn deficit run up last year.

“These figures show that last year George Osborne borrowed £9bn more than he planned to at the time of his spending review,” said Rachel Reeves, Labour’s shadow chief secretary to the Treasury. “There do need to be tough decisions on tax, spending and pay. But by choking off the recovery, pushing up unemployment and so borrowing billions more to pay for economic failure, cutting spending and raising taxes too far and too fast has backfired. And this government’s pledge to balance the books by 2015 is now in tatters.”

As a percentage of GDP, borrowing fell to 8.3% in 2011/12 from 9.3% in 2010/11, also in line with government forecasts. The chancellor has vowed to largely eliminate Britain’s budget deficit in coming years. It was at a record 11% when the coalition government took power in 2010.

Britain’s net debt climbed to £1.02tn in March, equivalent to 66% of GDP, the highest since records began in 1993.

When the government set out its deficit reduction plans in 2010, it pencilled in tax increases worth £29bn and spending cuts worth £83bn over the next five years. However, Blerina Uci at Barclays Capital said the five-year plan had turned into a seven-year plan: “The OBR has lowered its GDP growth forecast for 2011-12 to 0.5% from 2.4% and its 2012-13 forecast to 1% from 2.9%. This has led the government to slow the pace of fiscal consolidation in the medium term. The government has eased both the pace of spending cuts and the pace of tax increases – the net effect has, however, been for fiscal consolidation to last for longer and to be even more severe in the long run (cumulative spending cuts have increased to £126bn).”

Tax receipts were disappointing in March, which suggests that weaker economic activity took its toll. Income and capital gains tax receipts were down by 3.6% year-on-year, while the VAT take fell 1%.

“With the economic recovery continuing to stutter, we think it will become increasingly difficult for the government to meet its ambitious deficit reduction plans in the coming fiscal year,” said Samuel Tombs, UK economist at Capital Economics.


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Posted by admin - April 24, 2012 at 19:13

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Barclays chief Bob Diamond links part of bonus to improved performance

Chief executive attempts to head off shareholder rebellion over £17m pay package at next week’s annual meeting

Barclays scrambled to head off a damaging revolt over the £17m pay package of its chief executive Bob Diamond on Thurdsay by changing the terms of last year’s bonus just eight days before a crucial shareholder vote.

In an unscheduled announcement to the stock market demonstrating the level of anxiety about the scale of the potential shareholder rebellion at the annual meeting a week on Friday, the bank also pledged to bolster its dividends to try to address investors’ concerns that it paid £2.1bn in bonuses last year – more than three times the £700m used to pay a 6p dividend to shareholders.

The surprise move came after the bank earlier this week had embarked on urgent canvassing of major investors asking them what could be done to limit the level of dissent sparked by a £2.7m bonus for Diamond for 2011. There was also anger over the decision to pay a £5.7m tax bill he incurred when moving back to the UK from the US to become chief executive after more than a decade running the investment bank Barclays Capital.

The bank is now more closely linking Diamond’s bonus to a measure of financial performance known as return-on-equity, which is the bank’s net income after tax divided by shareholder equity. Diamond’s return-on-equity target is 13% – well above the 6.6% reported for 2011, a figure he described as “unacceptable”.

Diamond will have half of his £2.7m share award for 2011 linked to the return on equity in three years’ time. Only if the bank’s return on equity is greater than its cost of equity (11.5%) will he take that half of the bonus. The same will apply to the £1.8m bonus awarded to finance director Chris Lucas. Until now, neither bonus had any performance criteria attached and would have been released, in shares, to both directors in three years’ time.

The bank immediately won round Standard Life, which owns 2% of the shares. Guy Jubb, head of corporate governance, said: “We now intend to support the remuneration report at next week’s AGM.”

However, it was far from clear that other investors had been convinced so easily and Barclays could face a tense week while shareholders lodge their votes not only for the remuneration report but also for the re-election of Alison Carnwath, the non-executive who chairs the remuneration committee. “Some are tempted to shift but most are not,” one shareholder said. “It’s a bit late to be doing this if the company thinks this is such a good idea and also it does not address the fundamental issues on pay.”

Advisory body Pirc kept its recommendation to vote against the remunerartion report and Carnwath, arguing there should have been no bonus at all given the bank’s performance. David Paterson, head of corporate governance at the influential National Association of Pension Funds, said it was a “positive step” but called on Barclays to “engage with shareholders after the AGM in order to address the fundamental concerns which many have about the structure of executive pay”.

The Association of British Insurers, whose members control a fifth of the stock market, declined to comment on the changes. Last week it issued an amber top alert, highlighting its concerns about the bonuses of Diamond and Lucas. The ABI had previously pointed out that it was “business as usual” at the bank as the amount of revenues it had used to fund bonuses at Barclays Capital had remained static at 35% even though the bank had insisted bonuses were down 25% on the year.

The bank appeared to attempt to address this, saying it that it was “fully committed to ensuring that a greater proportion of income and profits flow to shareholders notwithstanding that it operates within the constraints of a competitive market”.

Barclays added that it had made no changes to the tax arrangements.

Lib Dem peer Lord Oakeshott said: “This shouldn’t be enough to let them off the hook. What really sticks in the throat of taxpayers and investors is the blank cheque to cover his tax bill.”

The changes followed week of shareholder meetings led by chairman Marcus Agius and were “recognising the strength of opinion expressed by some shareholders, via those meetings, and the executive directors’ confidence in the future performance of the bank”, Barclays said.

Sticking to its target for a 13% return on equity, the bank said: “Achieving this target of 13% return on equity will allow the portion of post-tax profits that are distributed as dividends to normalise at a level much higher than today, and Barclays intends to continue to make steady progress towards that as the return on equity improves. The combination of higher earnings and a higher dividend payout ratio will allow a significant increase in the absolute level of dividends received by shareholders”.


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Posted by admin - April 19, 2012 at 18:07

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Barclays’ bonuses are out of whack with shareholder returns

If Barclays’ targets are to be meaningful, shouldn’t the failure to meet them be reflected in Bob Diamond’s bonus?

Would a boss who describes his firm’s financial returns as “unacceptable” then accept a bonus?

In the case of Bob Diamond, we’ll have to wait to find out. The Barclays chief executive is refusing to talk about his own rewards on the day of the bank’s annual results. Those results, however, are dominated by a single statistic: a return on shareholders’ equity of 6.6% for 2011, down from 6.8% last year. That outcome is miles away from Diamond’s target of 13% by 2013. Indeed, the man himself concedes the race is as good as lost already. The target has been downgraded to an aspiration “over time”.

Most investors regarded the 13%-by-2013 goal as hot air anyway, which is why the market has not reacted badly to Diamond’s admission: Barclays share price is up 2%. All the same, the returns figure raises a straightforward question: if these targets are to be meaningful, shouldn’t the failure to meet them be reflected in the boss’s bonus?

One assumes it will be since Barclays’ pay report last year specifically mentioned return on equity as one of the “key financial metrics” that would determine bonuses for executive directors. But until the numbers are published in the annual report, one can’t know for certain. Today’s reticence looks evasive.

Many shareholders are struggling to spot any evidence of a shift in Barclays’ attitude to bonuses — or, to use bankers’ preferred term, variable pay. Profits at Barclays Capital, the investment banking division, indeed varied greatly from the previous year — they collapsed by a third to £2.96bn. The bonus pool at BarCap is also down by a third, from £2.26bn to £1.54bn.

Barclays may regard that as evidence of the bonus system working as intended — ie, a stride-for-stride relationship between profits and bonuses. But, come on, that assumes you started from the right place. Nobody, surely, would claim that. Barclays outshone RBS and Lloyds and others during the big banking blow-up, but that’s nothing to boast about. Barclays is still a bank that is not even close to earning returns in excess of its cost of capital.

This is now the third year in a row of sub-par returns. There, of course, reasons why 13% remains a distant dream — “worse than expected macroeconomic conditions, in addition to new regulatory constraints,” explained Diamond. Yes, but another reason is Barclays unwillingness, or inability, to make the cultural shift to align properly the rewards of employees at Barclays Capital, the bank’s biggest engine, with the prosperity of Barclays shareholders.

Diamond cites the need to remain competitive — and claims his shareholders are supportive. But here’s news for you, Bob: some of your big investors are revolting.

Robert Talbut, chairman of the investment committee at the Association of British Insurers (and thus an influential voice), says: “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.”

Talbut is right. Barclays’ relationship with bonuses is barmy: it is paying out big sums on the assumption that acceptable returns may one day appear. That is not how the capitalism game is meant to work. Deliver the returns for shareholders before you fill your boots, Bob.


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Posted by admin - February 10, 2012 at 13:12

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Barclays caps bonuses at £65,000 but investors say it’s ‘business as usual’

• Association of British Insurers attacks bonus levels
• Annual bonuses for top executives down 48% on 2010
• Profits fall 3% to £5.9bn
• Bob Diamond’s bonus could be £900,000
• Return on equity down to 6.6% for 2011
• BarCap revenue and profits down

Barclays was on a collision course with its shareholders on Friday despite the bank’s insistence that it had cut the bonus pool for its investment bankers at Barclays Capital.

Robert Talbut, chairman of the investment committee at the Association of British Insurers (ABI) 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.”

The ABI, whose members control a fifth of the UK’s stock market, had been urging Barclays to show restraint ahead of this bonus season and had written to all banks to make this point.

Barclays announced on Friday that it was capping cash bonuses at £65,000 as it reported a 3% fall in profits to £5.9bn.

Chief executive Bob Diamond admitted the returns to shareholders were “unacceptable” and targets set only last year may be missed.

Providing more detail about bonuses than usual, the bank said that the value of bonus per group employee was down 21% year on year to £15,200, while the average value of bonus per employee at Barclays Capital, its investment banking arm, was down 30% to £64,000 — just below the value of the cap. Last year the average bonus was £91,000.

The bank said that annual bonuses for executives and its eight highest paid employees were down 48%. Diamond received a bonus in shares of £1.8m in 2010 so, if he is in line with the average, this indicates that his bonus would be around £900,000.

Diamond again stressed the bank’s commitment to “citizenship” and repeatedly refused to disclose whether he had been offered a bonus, what the size of the bonus might be and whether he intended to take any payout.

Unions were also unimpressed with Barclays’ bonus announcements. TUC general secretary, Brendan Barber — who is calling for taxes on bonuses — said that the payouts show that “City bonuses have nothing to do with rewards for success”.

“Barclays were kept afloat by a taxpayer guarantee and multi-billion cash injection from the Bank of England. Today’s anti-austerity pay largesse adds insult to subsidy,” Barber added.

While the bank stressed that in 2011 bonuses were down 26% across the group and down 35% at BarCap compared with 2010, the proportion of revenue used to pay BarCap’s 24,000 employees actually rose to 47% from 43% a year ago. Revenue inside the BarCap operation — which Diamond used to run until being elevated to chief executive a year ago — was down 22% and the profits in that operation down 32%.

“Very weak Barcap revenues do most of the damage today,” said Ian Gordon, banks analyst at Investec. But shares were up strongly on Friday morning, rising more than 3% to 240p.

The bonus pool in BarCap was down 32% to £1.5bn — but the World Development Movement reckoned this would pay for school meals for two years for the “23 million primary age children who attend school hungry across Africa”. Some 20% of the profits generated by the bank — £1.3bn — were generated in Africa. Christine Haigh, campaigner at the World Development Movement, said: “Big bonuses encourage bankers to take big risks, not only with financial stability through their debt-based investment, but also with people’s lives”.

As a percentage of BarCap’s profits, the bonus pool was 35% versus 36% a year ago. The total bonus pool for the bank’s 141,000 employees was down 25% at £2.1bn.

The bailed out banks Royal Bank of Scotland and Lloyds Banking Group — where both bosses are not taking their bonuses — are subjected to a £2,000 cap on cash bonuses.

Diamond admitted that its return on equity was just 6.6% in 2011 — down from 8.8% the year before and well below the target of 13% set a year ago.

Diamond said: “We are not satisfied with the return on equity we delivered in 2011 and are committed to delivering steady improvement moving forwards”. He refused to drop the target, however, instead refusing to say when it might be met. “13% remains absolutely the right target and its very achievable, but we may not achieve it in 2013 given the impact of the external environment,” he said.

He was also unable to say whether net lending to small businesses was up or down on the year, but stressed that the overall lending to businesses under the Project Merlin deal with the government was up 3% — compared with the wider market which was down 5%.

“We really got on our horses to get businesses going,” Diamond said.

Diamond expressed concern about the lack of confidence among businesses who he said running high cash balances which they were refusing to spend.

He said the current mood towards the banking industry was “not a positive” but said, of the move to cut bonuses, that “we need to balance remaining competitive with being responsive to the public mood”.

He is yet to set out how the bank intends to respond to the recommendations to erect a ringfence around its high street bank from BarCap. But, he said: “Barclays’ universal banking model continues to be a competitive strength”.

The bank is paying a 3p dividend in the fourth quarter to shareholders, who had been lobbying the bank to reduce pay, taking the total for the year to 6p.


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Barclays caps bonuses at £65,000

Bank said that bonuses for each employee were down 21% to £15,200, and down 30% to £64,000 in its investment banking division

Barclays announced on Friday that it was capping cash bonuses at £65,000 as it reported a 3% fall in profits to £5.9bn. The bank also admitted it may miss the targets it had set itself for making returns to shareholders.

Providing more detail about bonuses than usual, the bank said that the value of bonus per group employee was down 21% year on year to £15,200, while the average value of bonus per employee at Barclays Capital, its investment banking arm, was down 30% to £64,000 – just below the value of the cap.

The bank said that annual bonuses for executives and its eight highest paid employees were down 48%. Chief executive Bob Diamond received a bonus in shares of £1.8m in 2010 so, if he is in line with the average, this might indicate that his bonus would be around £900,000.

Barclays shares were down 3% at 225.9p in early trading.

But the bank admitted that its return on equity was just 6.6% in 2011 – down from 8.8% the year before and well below the target of 13% set by Diamond.

“Since setting the target the worse than predicted macro economic conditions, in addition to new regulatory constraints, mean that we may not be able to deliver 13% returns by 2013,” the bank said.

“We are not satisfied with the return on equity we delivered in 2011 and are committed to delivering steady improvement moving forwards. Our rock solid capital, liquidity and funding positions provide us with the flexibility and confidence to meet the economic and regulatory challenges ahead,” Diamond added.


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