News Column

Barclays condemned over pounds 2.4bn bonuses: Payouts up 10% despite profits fall and job cuts Bank's boss says he cannot control market-led pay

February 12, 2014

Jill Treanor



Barclays faced condemnation yesterday after announcing a 10% rise in bonus payouts despite a dramatic fall in profits and plans to cut 12,000 jobs this year.

The bank's new boss, Antony Jenkins, came under intense pressure after being accused of failing on promises made only a year ago to clamp down on pay and change the culture of the bank after its pounds 290m fine for rigging Libor.

The TUC accused the bank of "sticking two fingers up to hard-pressed families across Britain", while the Unite union was furious at further cuts at the retail bank, which could harm customer service.

But the harshest words came from the Institute of Directors, whose corporate governance director Roger Barker asked "for whom is this institution being run?" after the bank paid out pounds 2.4bn in bonuses but just pounds 860m in dividends to shareholders. The bank disputes that figure, but refused to say exactly how much it is paying out to shareholders, which has been complicated by last year's pounds 5.8bn rights issue, forced upon Barclays by the Bank of England to boost its financial strength.

The main investor body, the Association British of Insurers, refused to respond to Barker's accusation that investors were "supine" in failing to control pay at Barclays.

The position of the bank's chair of remuneration committee Sir John Sutherland - appointed to the role only 18 months ago - was also questioned. Sunderland is entering his tenth year on the board, after which he is technically no longer deemed independent.

The total bonus pay for 2013 is pounds 2.4bn - up from pounds 2.2bn a year ago. Within that, the investment bankers enjoyed bonuses of pounds 1.6bn compared with pounds 1.4bn a year ago, even though their division suffered a loss in the fourth quarter and its annual profits tumbled 37%. Profits across the group, which also includes high street banking, Barclaycard and operations in Africa, fell 32% to pounds 5.2bn.

On a statutory basis - including accounting quirks and other one-off items - the profits were higher, at pounds 2.9bn.

Frances O'Grady, general secretary of the TUC, said: "Today Barclays has stuck two fingers up to hard-pressed families across Britain by announcing another multibillion-pound bonus pool." Labour said its bonus tax should be reintroduced.

Jenkins, who has waived his own pounds 2.7m bonus, insisted he had the support of shareholders for the higher bonuses, which had to be paid because he had no control over market-led pay. He also insisted the bank was acting within the "spirit and letter" of the law by paying monthly "allowances" to key staff who might otherwise face pay cuts as a result of the new EU cap on bonuses, which will limit payouts next year to 100% of salary, or 200% if shareholders approve.

"If we are to act in the best interests of our shareholders we have to make sure we have the best people in the firm," Jenkins said.

The average bonus per member of staff, accross the bank, is pounds 17,000, up from pounds 15,600. However, the average payout in the investment banking operation is pounds 60,100, up from pounds 54,500. The bonuses to the highest paid staff will be revealed next month when the bank publishes its annual report. Last year it handed more than pounds 1m to 428 of its bankers.

Jenkins said 820 senior roles are to be cut - or 10%. He also disputed concerns about the impact of job cuts on customer service. 7,000 of the 12,000 job cuts will be in the UK but not all in the high street.

"Customers can now do their banking when its convenient to them, not . . . us. Technology allows [us] to reduce headcount," said Jenkins.

Vince Cable, the business secretary, said: "We need a responsible banking sector [that] rejects the bonus-fuelled culture of the past and puts the needs of consumers and businesses at the heart of what they do."

Andrew Tyrie, chairman of the treasury select committee, said Barclays' shareholders needed to ask if the pay was justified by the bank's returns to shareholders.

Even the presentation to City analysts was dominated by questions about bonuses and the investment bank. "Analysts were "perplexed" and "disappointed" by the investment bank pay rises," said independent analyst Louise Cooper.

A year ago when Jenkins announced his plan to turn Barclays into the "go to" bank the shares rose 9% to 327p. Yesterday they were the biggest fallers in the FTSE 100, ending nearly 4% lower at 264p. The dividend was held at 6.5p for the year.

Captions:

Critics included the Institute of Directors, who asked: 'For whom is this institution being run?' Photograph: Andy Rain/EPA



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Source: Guardian (UK)


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