The two top executives at Barclays are not taking their bonuses for 2009 in an attempt to assuage public anger over pay even as the bank prepares to pay out bonuses of more than £2bn to its 23,000 investment bankers.
As the bank reported record profits of £11.6bn this morning, chairman Marcus Agius took the unusual step of trying to defend the bank's bonus policy. While the bank's remuneration committee had been prepared to hand bonuses to chief executive John Varley and president Bob Diamond, the pair declined the payments. Agius said he "applauded" their decisions.
Overall, the bank's 144,000 staff – including those working in high street branches – received total cash payments of £1.5bn and £1.2bn in long-term awards.
The average bonus at Barclays was £19,000 while the average bonus received by the bankers at Barclays Capital, the investment banking arm known as BarCap, was £95,000 – suggesting a bonus pot of more than £2bn.
The bank expects to pay £225m in taxes to pay the new, one-off 50% levy on bonuses of over £25,000 – giving the latest confirmation that Alistair Darling's estimate for £550m of receipts from this tax is too low.
The bank's shares rose 6.6% in early trading to 293p.
In BarCap, the average total compensation per employee was £191,000 while the average total income they generated for the bank was £515,000, up from £281,000 a year ago.
The bank insisted that it was paying out 38% of the revenues at BarCap in pay, compared with 44% last year. Diamond indicated that this lower pay out ratio was the "direction of travel" for the future. Varley insisted the bank's objective was to "pay the minimum".
Diamond, who runs the Barclays Capital investment bank, has already received £22m from the sale of shares in Barclays Global Investors, the asset management arm which helped bolster the 92% rise in profits. He also sold £5m of Barclays shares just before Christmas.
Without the proceeds of the sale to BlackRock in June, the profits were £5.3bn, down 13% on 2008.
BarCap generated £2.4bn of the profits, after absorbing £1.8bn of losses on servicing Barclays' own debt, after rapid growth following the acquisition of the Wall Street operations of the collapsed Lehman Brothers in September 2008.
Much of the focus was on bonuses, largely received by the BarCap bankers. Agius said: "Out of consideration of the continued impact of the economic downturn on many clients, customers and shareholders, combined with the fact that banks and bankers' pay remain matters of intense public interest and concern, both [Varley and Diamond] have advised the board that they wish to decline any such awards for the second successive year."
'Safeguarding the world'
Agius said that all other members of executive team at Barclays, including finance director Chris Lucas, would have 100% of their bonuses deferred and awarded over three years, and subject to clawback – allowing the bank to reclaim the money if profits later turn sour.
He also indicated that the bank had conducted sweeping reviews of its pay policies.
"More broadly across Barclays, deferral structures have been implemented which are consistent with the new Financial Services Authority remuneration code and the Financial Stability Board implementation standards endorsed by the G20," Agius said.
"We must together safeguard the world from a recurrence of the events of the last three years. Financial services are integral to everyday life, and we will strive to demonstrate, both in our words and actions, that Barclays is responsive to public concerns and to the needs of those we serve, and committed to playing its part as the banking industry rebuilds trust," Agius said.
The bank reported record income of £30bn, a rise of 34% on 2008, which was knocked by a 49% rise in impairment charges which reached £8bn.
Varley said: "Barclays Capital had a very strong year across all global franchises, in particular as its businesses in North America started to reap the benefits of the Lehman acquisition and integration".
But other major divisions of the bank suffered falls in profits. The high street bank in the UK suffered a 55% drop in profits to £212m while profits in the commercial bank fell 41% to £749m. At the credit card arm Barclaycard profit before tax decreased 4% to £761m. Impairment charges in its western European global retail and commercial banking rose £370m to £667m, largely driven by losses in Spanish commercial property, construction and small business loans.
The Liberal Democrats, who are calling for big banks to be broken up to protect the taxpayer for future bailouts, insist that Barclays illustrates their point. Lord Oakeshott, Liberal Democrat treasury spokesman, said: "The BarCap tail is wagging the Barclays bank dog. British taxpayers are insuring a boy racer in a Ferrari when it should just be a careful driver in a family saloon. Break up the banks now and limit taxpayers' guarantees to basic retail and business banking."
The bank resumed dividend payments in the third quarter and the final dividend of 1.5p takes the total for the year to 2.5p per share.
