Barclays defeats rebels opposing £1.4bn investment bank payouts

Shareholders rubber-stamp salary and bonuses pool for Barclays Capital after profits soar 62% to £1.47bn in Q1
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The Independent Online

Barclays defended its remuneration policy after it emerged that the bank has set aside £1.4bn to pay its investment bankers' salaries and bonuses for the first quarter of this year.

The company said its compensation ratio for investment bankers – the proportion of income allocated to pay – had been pegged at the 2009 level of 38 per cent despite the ongoing row about high earnings enjoyed by financiers.

The investment bank Barclays Capital generated income of £3.85bn in the first three months of the year. Profits surged by 62 per cent to £1.47bn, underlining the importance of the unit to Barclays, whose pre-tax group profit came in at £1.82bn.

Sir Richard Broadbent, the vice-chairman of Barclays and head of its remuneration committee, told the bank's annual meeting that setting pay was a "delicate balancing act". "We are well aware of the strength of feeling on this issue," he said. "The remuneration committee is asked to make a commercial judgement about where the interests of shareholders lie. The market for talent remains very competitive."

He also rounded on those who have criticised the sum that the bank's president, Bob Diamond, earned last year, largely from a £26m sale of his shares in Barclays Global Investors, which he sold to the fund manager Black Rock. Mr Diamond's salary was a relatively modest £250,000 and he waived his annual bonus for a second year running, as did the chief executive, John Varley.

"There has been a lot of comment, most of which has been wrong," said Sir Richard. "The only new element compared to 2009 [of Mr Diamond's pay] is a new long-term incentive plan which will run from 2010 to 2012, and which will not pay out unless stretching performance targets are met. No performance, no pay."

The maximum payout under the plan could be £20m. The bank stressed that no decision would be taken on payouts from Barclays Capital's £1.4bn fund until the end of the year.

Before yesterday's meeting, Pirc – a consultancy that advises institutional investors about corporate governance – had urged Barclays' shareholders to vote down its remuneration report on the grounds that its executive pay was excessive and its performance targets were not demanding enough. However, in the end 93.7 per cent of shareholders backed the bank and, despite a small protest outside the AGM, criticism of the board was muted, particularly when compared to previous, fiery meetings that saw vocal attacks on Mr Diamond.

Marcus Agius, the Barclays chairman, said it would not comment on Liberal Democrat proposals to break up Britain's banks. He said the company's revenue streams made it stronger and less likely to face difficulties than "narrow banks".

Despite the apparently strong first quarter and trouble-free meeting, the bank's shares fell sharply and finished the day 23p lower at 338.25p, making it the biggest faller on the FTSE 100 in percentage terms.

Impairments fell 35 per cent to £1.5bn compared with the first quarter of 2009. But Nic Clarke, of Charles Stanley, said: "Although overall group Q1 profit was in line with expectations, on the one hand the market is likely to be pleased with the bad debts performance, but on the other hand it is likely to be disappointed with the performance of BarCap. The division is so key to the performance of the group that, despite growing profits by 62 per cent, the fact that more was expected from BarCap will put downward pressure on the share price."

The issue of pay was not so easily handled at Credit Suisse, which saw 29 per cent of shareholders voting down its proposed bonuses for 2009 and another 4.6 per cent abstaining.