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Buxton: Barclays bonus obsession is blinding investors
by Robert St George on Mar 19, 2014 at 07:39
While Roger Barker, director of corporate governance at the Institute of Directors, was one of the sharpest critics of the bank’s decision to increase its bonus payouts by 10% to £2.4 billion while its dividend distribution was £859 million, Buxton (pictured) takes a different view. His £1.1 billion Old Mutual UK Alpha fund has a 3.4% weighting to Barclays, and he is happy to stick with his call.
‘We did have a very, very good meeting with the Barclays finance director post the results,’ he said.
‘Interestingly we begin to get the sense, talking to other brokers and shareholders, that perhaps other shareholders went steaming into their meetings with either the finance director or chief executive Antony Jenkins so indignant about the bonus issue that they backed into a corner and didn’t really say very much.’
Buxton continued: ‘We take a more sanguine view that actually Barclays had done a significant amount on the bonuses last year and has to relent a little bit this year.’
In its 2012 results Barclays reported that it had reduced total incentive awards by 16% at the group level and by 20% within the investment bank.
For Buxton, the more important aspect of the 2013 numbers was the improvement in the bank’s capital ratio – claiming that finance director Tushar Morzaria had ‘achieved wonders on that score’. This will enable the finance director to focus now on improving the investment bank.
‘The market has completely given up on this company ever making a decent return and he is very clear that there are large swathes of the investment bank that are not going to cut the mustard in terms of return targets and that there has to be a substantial further reduction in the group capital allocated to that business,’ relayed Buxton.
‘We are absolutely sticking with this and are going to add to the position as it continues to drift off,’ he concluded. Barclays' share price has plunged by 26% over the past year and is now trading at 235.4 pence.
Buxton’s Old Mutual UK Alpha fund has returned 43.7% over the past three years, ahead of both the peer group average of 32.8% and the FTSE All Share index’s 27.7%.
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by Robert St George on Jul 23, 2014 at 10:02