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Barclays: the figures to make you – but not Bob – weep

The annual results from Barclays (BARC.L) show banking is changing – but is its boss Bob Diamond doing enough to quell public anger on bonuses?

 
Barclays: the figures to make you – but not Bob – weep

Bob Diamond, Barclays’ chief executive, has refused to comment on whether he is in line for a bonus and whether he will take it or, like RBS boss Stephen Hester, waive it in response to intense public pressure.

Unlike RBS, Barclays was not directly bailed out by the government and tax payer, so Diamond could tell us all to go to hell.

He’s unlikely to do that but his actions could nonetheless be provocative. According to one report Diamond could receive total share and cash bonuses of between £2.5 million and £3 million this year.

Although this would be a lot less than the £6.5 million he took in 2010 as boss of Barclays’ investment bank, it would reignite the controversy after Hester’s humiliating climbdown.

Barclays is refusing to say what Diamond will get, but it is bowing to popular opinion by slashing executive bonuses by 48% and overall bonus payments to bank staff by 25% this year (see table).

The question remains though, is it enough? The average bonus paid to all Barclays employees is an impressive £15,237. Within Barclays Capital, the business that Diamond used to run, the average bonus will be a staggering £64,000, down 30% from last year.

Barclays: the figures behind the bonuses 

2011 2010 Percentage change
Total staff costs £11.4bn £11.9bn -4
Salaries £6.3bn £6.1bn 2
Bonuses
Bonus pool £2.5bn £3.3bn -25
% of group pre-tax profit 28% 33% -10.6
Executive bonuses n/a n/a -48
Bob Diamond £2.5-£3m (unconfirmed) £6.5m -61
Average bonus (group) £15,237 £19,329 -21
Average bonus (Barclays Capital) £64,000 £91,169 -30
Bonuses paid this year £898m £1.7bn -46
Deferred bonuses (cash + share) £1.3bn £1.2bn 6
Results
Total income £28.5bn £31bn -8
Profit before tax £5.9bn £6bn -3
Cost: income ratio 64% 64% 0
Return on equity 6.6% 6.8% 2013 target: 13%
Dividends 6p per share 5.5p per share 9
Loans to customers £121.2bn 115.1bn 5
Loan: deposit ratio 118% 124% -4.8
Financial strength (core tier 1 ratio) 11% 10.80% 1.8
Bad stuff
PPI compensation £1bn
Impairment of stake in fund manager BlackRock £1.8bn
North American litigation £1bn

Source: Barclays 2011 results

It is true that a greater proportion of these bonuses are being deferred and paid in shares, rather than all in cash upfront as they used to be. A £2.5 billion bonus pool is big but the lion’s share of the bank’s staff bill of £11.4 billion is in normal salaries.

Nevertheless, these are huge sums compared with what most people can expect. Moreover, many people will be amazed that a business like Barclays can hand out 28% of its profits in bonuses. Just think how much more it could pay in taxes or in dividends to our pension funds if it paid less in bonuses?

This all comes at a time when the bank’s pre-tax profits have fallen 3% with profits at bonus hungry Barclays Capital plunging 32%. The bank's overall performance – while good in some places – is mixed. For example, it is nowhere near meeting a 13% target for return on equity which Diamond set for next year and costs remain high. The high street branches are doing well and corporate banking has returned to profit but remember 2011 was a year Barclays set aside £1 billion in compensating people to whom it had mis-sold unecessary and useless payment protection insurance. It also faces the risk of nasty bills from litigation arising from the credit crunch in the US and Canada.

The fact is, banks are rightly coming under increasing control. As banking becomes a safer, more regulated business, the financial returns that banks make will diminish. That will ultimately have an impact on us all as shareholders or pension savers. However, even after today's cuts the bank's bonuses look out of step with the new reality. This year's cut from Barclays should be the first in a series.

28 comments so far. Why not have your say?

Anthony Tinslay

Feb 10, 2012 at 13:01

Three facts should be considered before rash observations are made.

1 Barclays did NOT receive taxpayer money

2. A reduction in bonuses paid does not necessariily provide more taxation - probably even less as the bonuses in the hands of emplyees are themselves taxed and at a higher rate than Corporation tax.

3 Whatever bonus or reward Bob Diamond receives he does control a business with 140,00 employees worldwide and NOT a football team

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Raman Morar

Feb 10, 2012 at 13:06

I think he should get his (Bob) bonus

Stop the Banker Bashing - otherwise we will lose talent

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Scottino

Feb 10, 2012 at 13:11

Return on equity is miserable, but.. as the P & L cleans up they may get closer to that 13% target which in itself is not spectacular. The dividend is miserable and they should be paying double the current amount. If you think that is the future then the shares should progress as equity is 520p per share. At similar levels do you buy BT or Barclays? Do you buy GSK or Diageo? I'll take BT and GSK anyday.

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Anonymous 1 needed this 'off the record'

Feb 10, 2012 at 13:28

Only x2 things with a Directors bonus, what was the EPS and Div. Payment. Depending on these, should depend the Directors bonus.

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Anthony Tinslay

Feb 10, 2012 at 13:38

Anonymous 1 - EPS was 25.1p and total year dividend 6p each per share.

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Anonymous 2 needed this 'off the record'

Feb 10, 2012 at 14:08

Frankly this is a pathetic article from a website that relies on a profitable financial sector.

1) Personal income tax is much higher than corporation tax

2) If you don't pay bonuses to people in high revenue areas such as institutional trading and M&A, they will join a foreign bank that will

3) Barclays was not bailed out by the tax payer

4) Miners, Oil traders, Pharma pay as much if not more.

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Richard Blackburn

Feb 10, 2012 at 14:16

True Barclays wasn't bailed out by the taxpayer...directly. It does how ever benefit from an implied Government G'tee and an increase in the deposit protection limits. As much as I think Bob is good for FS as a whole (and a good guy- a friend works directly under him) there could be a little bit of humility here- they didn't avoid the problems of others they simply went to the Middle east for the bail out.

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mark douglas

Feb 10, 2012 at 14:19

have they rid themselves of all their European debt (PIIGS) and of their east european debt yet?

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mark douglas

Feb 10, 2012 at 14:25

the old lady lent them a billion in July 2007 too.

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david richardson

Feb 10, 2012 at 14:25

I would like to know more about the bonus pool paid in deferred shares.

Do they buy shares in the market today and then dish them out at a later date to the employees concerned? or do they issue new shares as and when the time arrives? and do they charge the cost of these new shares to the profit and Loss account?

an accountant might know.

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S-ville

Feb 10, 2012 at 14:43

Corporation Tax being lower than income tax leads to the sort of nonsense we're seeing in the Civil Service with some staff having the option to be paid gross - yet still retain peripheral staff benefits like pension scheme membership.

To be honest, I don't give a monkeys how much Bob Diamond earns - all I know is that it's a figure that has been totally inflated over the past decade or so by company CEOs under the spurious cover of benchmarking and remuneration committees.

The only reason it's the going rate, and everyone start panicking at the thought of some exodus if we ever called their bluff on these figures is that that's the figure they say they need to earn and we all accept it. It's not based on productivity or measurable performance - simply pure greed.

You have to think that Diamond and his ilk must have incredible low self-esteem if they need such ridiculous salaries to keep them happy. Or maybe they have problems in 'other areas' (nudge, nudge) and a multi million pound pay packet is some sort of compensatory package for the missus....

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Keith Snell

Feb 10, 2012 at 15:34

The constant claim that banks are unfairly being criticised their bonus payments are too high etc is yet another pathetic whinge, anyone with any common sense would not pay them, the comparison with football managers is equaly ludicrous as is their pay. I do not believe that droves of brilliant people would leave the country if their excessive pay was curtailed and even if they did I doubt the loss to the UK would be worth bothering about. Banking is hardly the most demanding of jobs so why the silly pay levels. By comparison the managers of manufacturing companies which are far more demanding are paid significantly less and their value to the country is far greater. These are the true wealth creators.

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Anthony Tinslay

Feb 10, 2012 at 15:34

Mark Douglas and others - all the information is included in the report today.

Sovereign debt to PIGS countries reduced over the year by 14% to £7.1bn. Within that Spain £2.5bn, Portugal £0.8bn and Italy £3.5bn. Greece is described as minimal. In addition of course Barclays does have local exposure in both Spain and Italy although mostly to Home Loans

David Richardson - over 75% of the bonus is in deferred shares and it appears that these are issued as and when required over a 3 year time frame March12/13/14. There is not a charge to P & l as such but merely a dilution in equity at the time of issue. In addition there appear to be stringent conditions attached including meeting targets and remaining in emplyment.

Hope that this helps you to understand the complexity of these results.

I am happy with the increased dividend - 3p final instead of 2.5p making 6p (5.5p last year)

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Julian Ford

Feb 10, 2012 at 15:35

Maybe if we paid politicians huge salaries and £3mil bonuses we would stop the shameless and hypocritical banker bashing (despite being as guilty by consent for the mess we are in) and get in some decent, effective politicians!

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Anthony Tinslay

Feb 10, 2012 at 15:40

Mark Douglas - re the billion in 2007. Not really a lending but at a time of financial crisis when the short term funding business almost diappeared the BOE made available funding to all players. Long since repaid. in fact with Barclays able tio increase their Tier 1 capital to 11% that means that even more cash is now held with Central Banks and short term Gilts.

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dennis rooke

Feb 10, 2012 at 15:51

Mr Tinslay clearly does not understand Investment Banking the Government Aid may not have been direct but the Bank of England under the quantative easing scheme allowed banks like Barclays to borrow very cheap money near zero which Banks like this gave to their trading divisions to take positions in Commodities and Futures etc to make loads of money and pay ridiculous bonuses. D. Rooke

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Anthony Tinslay

Feb 10, 2012 at 17:19

Mr Rooke - I certainly do understand Investment Banking and you are quite incorrect in your analysis. There is no direct relationship between trading in Commodities etc and QE. In any event Barclays is not a Commodity trader and neither does it for itself deal in Futures, Dealing in Futures where it exists is in support of other customer related activities. QE is an availability for the market to enable it to provide more lending to UK customers as indeed Barclays appear to have done by exceeding their Project Merlin agreement with Gov't .

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Michael Brooks

Feb 10, 2012 at 17:58

Raman are you `Dave` in disguise.

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Enrico

Feb 10, 2012 at 18:01

The comments appear to have gone off the subject so I`ll endeavour to bring it back in line.

I can`t understand why the shareholders have authorised a bonus to anyone who doesn`t achieve growth within the company and achieve over budget performance.The published figures don`t bear this out so in my opinion no bonuses should be paid.If Bob Diamond is not happy with this then let him leave and give someone else the opportunity to grow the company.I`m sure theres a number of experienced people out there who would jump at the chance on a lot less salary and bonus until they proved themselves.

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alan franklin

Feb 10, 2012 at 21:21

Bankers are not the only people to have conned the world that huge salaries are the norm and their "right" or otherwise they would take their genius elsewhere.

I watched as town clerks - the legal guys who used to run your local town hall-morphed into chief executives at ridiculous salaries for doing, frankly, not a lot - they have vast back-up teams who do the actual work, such as it is.

It is astounding how many people don't question the absurd idea that "if we don't pay them ...(.fill in your own vast amount here) they will be off to take over Mudborough Council. Let 'em go - they are mostly a waste of space anyway.

Back to the topic: I don't care what the heads of companies I don't own shares in earn. That is a matter for the shareholders. Here it's up to long-suffering pension plan participants to prod their dozy pensions managers.....If you can't be bothered to take an interest in how your money is invested, whinging is a waste of time.

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dennis rooke

Feb 11, 2012 at 07:12

Mr Tinslay I cannot agree with you my previous existance was as a Deputy Chief Executive and Head of Global Markets at the thenBZW which was renamed Barclays Capital. I will leave it to the readers to decide who is mopre qualified to comment on this issue and I can assure that we did and they do speculate dennis rooke PS. So that our readers can judge for themselves what is your experience in trading markets? dennis rooke

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Anthony Tinslay

Feb 11, 2012 at 10:08

G'Day Mr Rooke - it appears that we were colleagues. Rather not give you my specific role (in the past like you) but it was rather senior in the parent company of your employer. In any event Barclays Capital ( and certainly BZW) was somewhat of a different animal to the Investment Bank that now operates. Commodities though - not a direct feature. Our Pensions are the key thing to be concerned with.

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dennis rooke

Feb 12, 2012 at 07:27

Heullo Anthony, Then you do know about Banking my aplogies nice to see a fellow Barclays man still interested keep well dennis

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Keith Snell

Feb 12, 2012 at 11:15

I sold nearly all the bank shares I own as I believe they are to large too inefficient and produce too little in dividends to shareholders, the only ones who gain by this apart from the revenue are the senior staff whose pay remains far too high, It is rubbish to suggest they will all go elsewhere, where are these jobs other than UK and USA.

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Antonio VIvaldi

Feb 13, 2012 at 11:18

The point here is that the "bonus pool" is twice the size of the dividends being paid out. Who is the bank being run for? Highly paid investment bankers or the bank's owners - the shareholders? This racket has gone on for at least two decades now. When will shareholedrs wake up and realise they have been taken to the cleaners and that banks will always be terrible investments while the managers run them for their own (bonus-inflated ) benefit, using taxpayers as a back-stop? And which banks will hire all the Barclays staff if they leave because bonuses are slashed? The Spanish ones which have just cut their top executive pay by 75% perhaps? The Swiss ones who are sacking staff?

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mr mcgee

Feb 22, 2012 at 20:32

a bonus should be a reward from shareholders as the owners of the company. Any bonus should be directly proportional to total shareholder return. I would give him 5 million bonus if he tripled profits and dividends but the whole bonus culture and wage setting is out of touch with reality. Barclays did borrow a biliion from the old lady and 500 billion from the US and get bailed out by the Saudi's. They also did just lose out on ABN Amro. Bosses used to get paid a single or sometimes double digit multiple of the average wage but these days its not less than a triple digit. When you have high unemployment and a lot of suffering across Europe its seen as morally wrong and will only lead to revolution.

Anyway good to see many of the Barclays executive wage settlement committee on this board.

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Rose G

Feb 23, 2012 at 09:04

S-ville

I think your theory about lacking in other departments covers a wide range of power hungry men, not just bankers. If bankers were all like DSK, it is not just their sexual appetite that is off kilter, but their avarice compounded by the inability of women to pander to these geriatric lechers is what makes them think they are actually worth it.

Berlusconi, DSK, Clinton, Prescott - these are all men who are not only gross in their appetites, but considered quite attractive by certain parties otherwise, we would not hear about them in the old age!

The world we live in is driven by greed - for competition, read greed & most things will be explained.

Our politicians & the markets are interested in just one element, which is growth of the economy - anyone with one iota of common sense must realise that in a world of finite resources, we cannot have eternal growth globally simultaneously, but somehow this 'growth' will somehow appear out of nowhere, or after daft policies with unintended consequences which nearly always affect the ordinary PAYEarner. State of matter changes all the time, so does life, but to hear from politicians & the media there is this utopia they are going to create to make the world a better place - cynicism is not becoming, but it is far more closer to the truth than any politician will let on. This is the way things have been & will continue. Libyans will realise in 10 or 20 years time, that the madman that was their leader will have been followed by even madder men, such is the nature of human beings. We do not learn from our mistakes, but repeat them time and again, as if amnesia is experienced by generations, time after time. Witness our actions in Afghanistan, were we not there before, or the Middle East, were we not there before?

To end my rant, we put our faith in madmen who appear plausible & because we do not want to loose face, we put up with these decisions, instead of exposing the fraudsters for what they are. It was ever thus! Macbeth was not a lone murderer, we associate with them without even knowing it!

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Anthony Tinslay

Feb 23, 2012 at 10:54

Mr McGee - I would not argue with you about bonuses but do give Barclays some credit. They did not 'just lose out with ABN Amro' - Barclays did a thorough investigation and pulled out because they did not want to increase their offer after what they saw. RBS clearly had different ambitions with Fred in charge and the rest is history. They did not borrow 1bn from BOE as such - the latter simply flooded the market with cash to increase liquidity in the market as it had almost dried up. It was not bailed out by the Saudis it was a share issue to other Middle East Investment funds at an agreed price rather than calling for a rights issue to existing shareholders. Rather a shrewd move as it turned out as much of those shares have since been sold on the market at a good profit to the investors. As for the 500billion from the US I have no idea what that might be - rather a lot of money it seems to me!

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