Diamond to slash costs and cut laggards adrift

Click to follow
The Independent Online

Barclays chief executive Bob Diamond yesterday pledged to slash £1bn of costs from Barclays and sell off or close a string of underperforming businesses as the bank said investment bankers' bonuses had been cut by 12 per cent to £2.6bn.

Mr Diamond described the bank's return on equity as "unacceptable" as he unveiled a 32 per cent rise in pre-tax profits to £6.1bn, although the bank stripped out the gain on disposal of Barclays Global Investors from the 2009 comparative figure which fattened last time to £11.6bn.

Mr Diamond pledged to take a hard and unsentimental look at the bank's portfolio to help achieve the cutbacks, but still insisted overall headcount at the bank, which employs nearly 150,000, would be "flat or grow slightly".

In an unusual move, Barclays issued a separate statement on bonuses alongside its results announcement saying the bank will pay £3.4bn in total and £2.6bn to bankers at investment bank Barclays Capital.

However, the compensation ratio at the investment bank rose to 43 per cent from 33 per cent, taking total staff costs at Barclays Capital to £5.6bn, up from £4.4bn. The bank said this was due to a change in the way it pays, with more money deferred than in previous years, and a change in the business mix. Mr Diamond said bonuses were down in line with Project Merlin, the agreement struck with the Government that was negotiated by John Varley, the former Barclays chief executive.

Mr Diamond said: "We tried to manage this in a way that was balanced. Merlin impacted the bonus pool. Globally it was down 7 per cent and at Barclays Capital 12 per cent. The UK is broadly in line with that. One thing, and of course I would say this, is there is an important balance between being sensitive to the environment and being commercial and competitive.

"Most of the people we compete with are not UK headquartered. We compete with banks like Deutsche Bank and JP Morgan. I really think we reached out and tried to be as responsible as we felt we could in an environment that was tough competitively."

Speaking after the results Mr Diamond praised efforts of the Prime Minister and the Chancellor in taking some of the heat out of the debate over banking.

Barclays also declined to comment on how much bonus Mr Diamond would get, or if he would accept one. Barclays' chairman Marcus Agius said Barclays would not answer any questions on the issue until its annual report is published next month.

Barclays profits were boosted by a sharp fall in loan losses, which dropped 30 per cent to £5.7bn. But eyebrows were raised after more than £500m was written off on a loan to Protean, the Cayman Islands hedge fund set up by former Barclays debt specialists.

They were lent the money to buy the debt by Barclays itself during the height of the credit crunch, but finance director Chris Lucas said the loan was now requiring the bank to set aside a huge amount of capital.

He said Barclays was going to seek repayment of the loan but admitted that this could result in a further loss for the bank.

The lion's share of Barclays profits was again provided by the investment bank Barclays Capital, which made £4.8bn. Its global retail banking division also contributed a healthy £1.8bn.

But Barclays Corporate lost £631m and Barclays Continental Europe lost £870m, ominously "reflecting a significant increase in corporate impairment in Spain to £898m".

Barclays in numbers

£2.6bn bonus poolfor investment bankers

£36bn Gross lending to business. Net lendingfigures – including repayments – not given, but are up (a little bit)

43% BarCap's compensation ratio: 43p of every £1 made went towards pay

£6.1bn pre-tax profits, up 32% on 2009

£5.6bn staff costs. Up from £4.43bn

£670m the dividend paid to investors: less than a fifth of the bonus pool or a quarter of what was paid to investment bankers, equal to 5.5p a share