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Barclays hikes bonuses amid warning on jobs and fall in profits Barclays condemned over £2.4bn bonuses
(about 9 hours later)
Barclays stoked the row over City pay on Tuesday by announcing a 32% fall in profits but a rise of 10% in the bonus pool for its 140,000 staff around the world. Barclays faced condemnation on Tuesday after announcing a 10% rise in bonus payouts despite a dramatic fall in profits and plans to cut 12,000 jobs this year.
Antony Jenkins, promoted to run Barclays in the wake of the £290m fine for rigging Libor, defended the decision to increase bonus payouts as he warned that between 10,000 to 12,000 jobs would be cut this year as he races to cut costs. Some 820 senior roles are to go along with 7,000 jobs in the UK. 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 £290m fine for rigging Libor.
In a move that sparked the fury of the TUC, which accused the bank of "sticking two fingers up to hard-pressed families across Britain", the bank announced it was paying bonuses of £2.4bn – up from £2.2bn a year ago – across the bank. Within that, the investment bankers enjoyed bonuses of £1.6bn compared with £1.4bn a year ago, even though the investment banking side suffered a loss in the fourth quarter and its annual profits tumbled 37%. The bank as a whole saw its profits fall to £5.2bn from £7bn. 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.
The inequity in the numbers sparked a furious reaction from the Institute of Directors, where corporate governance director Roger Barker asked "for whom is this institution being run?" and called on shareholders to take a stand. "Their approach to the banks continues to be supine. We would like to see shareholders take a more aggressive role in the governance of the bank, and in light of Barclays' fragile reputational recovery we would urge the bank to ensure that the chairman of its remuneration committee remains an independent director," said Barker. 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 £2.4bn in bonuses but just £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 £5.8bn rights issue, forced upon Barclays by the Bank of England to boost its financial strength.
Labour seized upon the numbers to call for a reintroduction of the bonus tax which Cathy Jamieson, shadow financial secretary to the Treasury, said "could fund a paid job for every young person out of work for 12 months or more, which they would have to take up or lose benefits". 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 profit figures, announced 24 hours earlier than scheduled, on Monday, because of a fears of a leak, showed that on a statutory basis – including accounting quirks and other one-off items – the profits rose to £2.9bn. This was also the year that the bank tapped shareholders for £5.8bn. 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.
Jenkins admitted that he only discovered the theft of confidential customer files – 2,000 names, addresses, phone numbers, passport numbers and details of personal finances – which is now the subject of regulatory scrutiny, after being informed of the loss by the Mail of Sunday. Only 300 of the 2,000 individuals affected have been contacted by the bank. The total bonus pay for 2013 is £2.4bn – up from £2.2bn a year ago. Within that, the investment bankers enjoyed bonuses of £1.6bn compared with £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 £5.2bn.
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 multi-billion pound bonus pool". In reference to the EU's cap on bonuses to 100% of salary, O'Grady added: "But rather than tackle the damaging City bonus culture, the Chancellor has been to Brussels to defend their greed". On a statutory basis – including accounting quirks and other one-off items – the profits were higher, at £2.9bn.
Jenkin justified the hike in bonuses – despite his pledge to show pay restraint and waiving his own £2.75m bonus – by insisting the bank needed to pay staff in a globally competitive environment. He also insisted the bank was acting within the "spirit and letter" of the law by paying monthly role-based allowanced to key staff who might otherwise take pay cuts as a result of the bonus cap. 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.
"We employ people from Singapore to San Francisco. We compete in global markets for talent. 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. Jenkins, who has waived his own £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.
"At Barclays we believe in paying for performance and paying competitively. Ensuring that we have the right people in the right roles serving our customers and clients effectively in a highly competitive global environment is vital to our ability to generate sustainable shareholder returns," he said. "We employ people from Singapore to San Francisco. We compete in global markets for talent. 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.
"After careful consideration, we determined that an increase of £210m over the prior year in the incentive pool was required in 2013 in order to build our franchise in the long term interests of shareholders." The average bonus per member of staff, accross the bank, is £17,000, up from £15,600. However, the average payout in the investment banking operation is £60,100, up from £54,500 – including payouts to low level and administrative staff. 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 £1m to 428 of its bankers.
Even though the bank tapped shareholders for £5.8bn of fresh funds last year under instruction from the Bank of England, the average bonus per staff member was £17,000, up from £15,600, while the average investment banker received £60,100, up from £54,500. 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.
Jenkins, who has set out to make Barclays the "go to" bank, has forced every staff member to embark on ethics training and set out eight new goals against staff will be measured in the future. One of his targets is increasing the number of senior women from 21% to 26% by 2018. "The reason why we're doing this is not because we're trying to deliver poorer customer service, actually quite the reverse. Customers can now do their banking when its convenient to them, not … us. Technology allows [us] to reduce headcount," said Jenkins.
Jenkins regularly describes the changes that technology will impose on the banking industry - he is thought to believe that as many as 40,000 roles could eventually go from the 140,000 workforce - and on Tuesday described a "one in a hundred year transformation" of the industry. Half of the 7,000 of the jobs being axed in the UK have already been announced and branches are eventually expected to close. There was no programme for branch closures, he said, but conceded the 1,700-strong network was changing.
He insisted that bonuses were down from 2010 by 32%. 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."
The bank is fighting a £50m fine from the Financial Conduct Authority for disclosures it made during the time of a crucial fundraising in 2008 but said this process had now been stayed while the Serious Fraud Office investigated. 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.
The dividend for the year is 6.5p, the same as last year. The shares were down almost 5% following the figures, at 262p, making them the biggest faller in the FTSE 100. 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. On Tuesday 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.