Bankers pocket £2.7bn bonuses as record profits announced

Press Association
Tuesday 16 February 2010 16:18 GMT

More than 23,000 investment bankers at Barclays pocketed an average £191,000 in pay and bonuses as the banking giant surged to record profits of £11.6 billion last year, it emerged today.

The payouts provoked anger despite chief executive John Varley and president Bob Diamond sacrificing bonuses for the second year in a row in a bid to pacify clients and shareholders hit by recession.

Barclays beat City expectations with a 92% jump in pre-tax profits - helped by the sale of its fund management arm and a bumper haul from investment banking arm Barclays Capital.

The bank acknowledged the "intense public interest and concern" over pay and said the share of BarCap revenues paid in salary and bonuses fell from 44% to 38% - but the total pot was almost double the previous year at £4.5 billion.

Across the whole group, Barclays paid out £2.7 billion in bonuses - £1.5 billion in cash bonuses and £1.2 billion in long-term awards vesting over three years.

Of this around 80% or £2.1 billion was paid out in bonuses to investment bankers, although Barclays has "managed down" the pay pot to reflect the £225 million paid to the Treasury under the bonus tax introduced at the end of last year.

Mr Varley said the bank had "got to be sensitive" about what it paid when public sector workers were facing salary freezes due to recession, but it had a responsibility to investors and clients to "field the best team".

"The market for the best people is both global and intensely competitive," he added.

Alongside the gesture of Mr Varley and Mr Diamond, all bonuses for other top directors will be deferred over three years and subject to clawback. Pay principles from the Financial Services Authority (FSA) and G20 summit have also been implemented.

Royal Bank of Scotland - which is 84% owned by the taxpayer - is likely to use Barclays' payouts to gauge the level of its own bonuses to investment bankers, to be unveiled at annual results next week.

A reported £1.3 billion payout will be hugely controversial amid a second year in a row of huge losses for the struggling bank.

TUC general secretary Brendan Barber said the Barclays profits showed that banks "win in both good times and bad" and called again for a "Robin Hood" tax on financial transactions.

He said: "Paying huge bonuses when people are still losing their jobs and businesses cannot get the loans they need because of a crash made in the finance sector goes against every concept of fairness."

Barclays turned to the Middle East instead of the taxpayer to raise emergency capital at the height of the crisis but gained from support measures for the system as a whole.

"It is not good enough for Barclays to say that they did not receive direct aid. All the banks have gained because it's now clear that whatever they do the State will bail them out," Mr Barber said.

But Barclays stressed it had lent an extra £35 billion during 2009 - far beyond its £11 billion pledge last April - to support the UK economy as it claws its way out of recession. This was split broadly between households and businesses.

Chairman Marcus Agius said the bank would be judged by "how we lend and how we pay".

He added: "We know that the impact of the credit crunch and of the subsequent recession has made the lives of millions of citizens and thousands of businesses more difficult. We know that it's our obligation to provide support in ways that are responsible."

Shares in Barclays jumped as much as 9% following the better-than-expected performance.

Profits were boosted by a £6.3 billion one-off gain from its sale of fund management arm Barclays Global Investors to US giant BlackRock, as well as a near-doubling of pre-tax profits at BarCap to £2.5 billion.

At BarCap, business has boomed after it bought parts of the failed US bank Lehman Brothers. Fewer competitors and fundraising by governments and companies across the world also boosted trading.

This more than offset other parts of the business hit by recession. Its UK retail banking arm, which has almost 1,700 branches across the country, saw profits fall by more than half to £612 million in the tough economic conditions.

Its UK commercial banking division also saw profits fall 41% due to rising defaults and falling asset values, while Barclaycard profits edged 4% lower to £761 million.

But across the group Barclays' bad debts were lower than expected at £8.1 billion, with impairment levels in the second half of the year 23% below the first six months of 2009.

The group is planning for a "moderate decline" in bad debt charges during 2010 with the exception of certain areas such as commercial lending, and said it had enjoyed a "good start" to the year so far.

Barclays added that its core tier one ratio - a key measure of the bank's capital strength - had almost doubled to 10% compared with 5.6% a year earlier.

The bank, which declined to participate in a taxpayer-backed insurance scheme for toxic debts, passed FSA stress tests on its financial strength last March.

Credit Suisse analyst Jonathan Pierce highlighted the lower-than-expected bad debts at the bank and said Barclays was "a clear relative preference among the UK domestic banks".

He added: "This is a good set of numbers from Barclays that should reassure the market on several fronts."

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