Barclays cuts bonus pools as annual profits fall

Bank unlikely to reach ambitious profit targets set by chief executive Bob Diamond when he took over

Barclays announced a 32 per cent cut in investment bankers' bonuses yesterday as it reported a 3 per cent fall in annual profits to £5.9bn and warned that it is likely to miss its ambitious, medium-term profitability target.

But the bank's attempts to defuse a fresh row over City pay by detailing bonus cuts failed as it was accused by the influential investors group the Association of British Insurers of conducting "business as usual".

Barclays' chief executive Bob Diamond refused to disclose his annual bonus, which is expected to be about £3m, until the annual report is published next month. The bank said bonuses for the executive directors and eight highest-paid executives were cut by 48 per cent.

That is certain to include Jerry del Missier and Rich Ricci, the heads of its investment bank Barclays Capital, whose pay packages were £14.3m and £14m last year, as well as Mr Diamond.

Bonuses across BarCap, where profits fell 32 per cent to £3bn last year, have been cut by 30 per cent to an average £64,000 for its 24,000 staff. There is also a first-time maximum cash level for annual bonuses set at £65,000.

The ABI said: "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. 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."

Barclays is the first of the major UK banks to report its full-year results for a period when banks have been under intense scrutiny over lending and bonuses.

Mr Diamond said banks still had a problem in terms of how they are seen by politicians and customers. "We have to get the public's confidence back again and we have to get lending back up again. That's slightly difficult because two of the biggest banks remain partially in public ownership. But the message has to be 'it's about the economy, it's about growth, it's about growth and it's about growth'."

Mr Diamond said he remains solidly behind the economic policies of the Chancellor, George Osborne. He said: "The challenge we face in the UK is fairly simple. Debt as a percentage of GDP has increased, not decreased, over the past two years. The Chancellor's focus on cutting public spending and cutting public debt remains absolutely right."

But Mr Diamond admitted Barclays might not achieve the target of a 13 per cent return on equity by 2013 which he set when he took over from John Varley in 2010. The bank yesterday said this key measure of its profitability had dropped from 7.2 per cent to 5.8 per cent last year.

Analysts had already discounted Barclays hitting its return on equity targets because economic conditions had worsened since Mr Diamond set them. Barclays shares rose 0.95p to 234.05p. Elsewhere there was strong growth in UK profits, up 60 per cent to £1.4bn, Barclaycard, up 48 per cent at £3.3bn, and Africa, up 26 per cent to £908m. European losses were reduced and corporate banking recovered from losses to a modest profit.

Mr Diamond said: "We expect the economic and regulatory environment to continue to be challenging in 2012, but, as we have shown in the past year, Barclays is improving its competitive position across all of our businesses and working hard to support economic growth more broadly."

The dividend for the year has been raised 9 per cent to 6p a share.

Mr Diamond also said that the bank had beaten the Merlin Project targets agreed with the Government in lending to small and medium-sized businesses by 13 per cent. Lloyds said it beat its target by 7 per cent.