Ordinarily, today’s results would have been a triumph for Barclays: the UK bank saw total income rise 34% to £31bn, pushing annual profits up 92% to £11.6bn – well ahead of City expectations, and enough to give its share price a 6% bump. But these are not ordinary times, particularly for the banks. So Barclays was firmly on the defensive this morning, highlighting its new lending figures, the amount of tax it would be paying, and the selfless decision by its two senior bosses to forego their bonus again. However, we suspect those who see this as a great British triumph will be in short supply; the majority are more likely to be indignant that after Barclays and co got us into this mess, they’re now cashing in on the fall-out…
Barclays chairman Marcus Agius led the rearguard action today: taking the unusual step of adding a statement to the results, he admitted that ‘the bond of trust between banks and their stakeholders has been significantly weakened by the events of the last three years.’ And when we assess how well banks have learned their lessons, he added, ‘we will be judged mostly by how we conduct our business and, in particular today, by how we lend and how we pay.’
On the first point, Barclays lent an additional £35bn last year, split pretty evenly between businesses and households. But pay is clearly the more controversial issue. Barclays CEO John Varley and Barclays Capital boss Bob Diamond have both ‘declined’ their bonuses (making do with their seven-figure base instead) for a second year in a row. But – stressing the ‘intensely competitive’ market for top talent – Barclays has set aside a cash bonus pool of £1.5bn for everyone else, plus another £1.2bn in long-term awards (with some possible claw-backs). The investment bankers at BarCap are getting a smaller chunk of overall profits this year – but with a whopping average bonus of £95,000 (count ‘em), those traders won’t exactly be going hungry.
There are a few caveats to these impressive numbers, however. Barclays’s retail and commercial banking profits were down not just in the UK but everywhere around the world – while its wealth management arm saw profits plunge 78%. There was also a 50% increase in write-downs, to £8bn. So the final profit figure was largely due to two things: a one-off gain of £6.3bn from the sale of fund management arm Barclays Global Investors, and a sterling display by its investment banking division, which has been going gangbusters all year.
To Barclays, this might seem justification enough for those fat bonuses. But we suspect the majority won’t see it that way, despite Agius’s efforts. After all, BarCap has been doing well precisely because other rivals have either fallen by the wayside (like Lehman) or been hobbled by their state shareholders (like RBS/ Lloyds). It may not have tapped the Treasury for funds, but it has still benefited from that implicit Government support. More significantly, since it was the banks that got us into this mess, people will undoubtedly be hopping mad that one of them is recovering a lot faster than the rest of the economy seems to be.
In today's bulletin:
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Embarrassed Barclays chiefs skip bonus after smashing forecasts
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