Barclays will be hoping to avoid another bombshell announcement that could overshadow its full-year results, coming up this week, for a second year running.
The British banking giant is expected to report a 36% drop in annual profits to £2.8bn, with earnings hit by bad debt provisions during a global pandemic. However, its spin doctors will find it much easier to control that narrative than another corporate scandal or investigation involving its chief executive, Jes Staley.
Last year, a 25% jump in earnings was easily eclipsed by news that the Financial Conduct Authority was investigating the way Staley had portrayed his ties to the sex offender and disgraced financier Jeffrey Epstein. That morning, not a single question was asked about Barclays’ results on its media call, which ran for less time than normal.
While the FCA is rarely quick to release judgments, it has been more than a year since its inquiry was launched, leaving Barclays and Staley waiting for the other shoe to drop.
In the meantime, Staley’s team will be parading strong profits from their corporate and investment bank (CIB) when they release results on Thursday, thanks to a jump in trading due to market volatility, and a rebound in corporate mergers and acquisitions at the end of 2020. According to consensus estimates, the CIB is expected to report a 20% rise in profits to £3.6bn, compared with £3bn for 2019.
It will not only help cushion the blow of putting aside more than £5bn to help cover a potential surge in defaults linked to Covid-19 for 2020, but also keep the activist investor Edward Bramson at bay.
Bramson’s investment vehicle, Sherborne, which has a 5.9% holding in the bank, has been nipping at Barclays’s heels since 2018, arguing that it should scale down the investment bank to focus on its consumer operations, and oust Staley over the Epstein investigation.
Bramson temporarily backed down during the Covid crisis. But with the UK’s vaccine programme gaining pace, Sherborne could re-emerge with force.
Staley has dug his heels in, confirming in October that he hoped to stay on for “another couple of years”. After completing a major restructuring of the bank and dealing with Brexit and the pandemic, he said: “It’d be nice to be here through more kinder winds.”
A longer tenure could also mean a rebound in Staley’s pay package. Barclays’s annual report, due alongside its full-year earnings, is expected to show a drop in Staley’s pay after he donated £392,000 of his own income to the bank’s coronavirus fund.
That donation would shave only 6.6% off the £5.9m Staley earned in 2019, which included a bonus of £1.7m. He is still likely to be the UK’s highest-paid banking chief, given that other bosses, like NatWest’s Alison Rose and Lloyds’s António Horta-Osório, have waived their bonuses.
Barclays traders, meanwhile, are reportedly set to see their bonus pool rise by 10%, according to Bloomberg. But any increase will be scrutinised by the Bank of England, which warned in December that it would keep a close eye on cash bonuses for senior staff, given the uncertain economic outlook.
And while the central bank lifted a ban on dividends, Barclays shareholders – including Bramson – will see their 2020 payouts capped at either 25% of profits over 2019 and 2020 combined, excluding previous dividend payments, or 0.2% of the value of their riskiest assets, whichever is highest.
But with shares down roughly 20% compared to the start of the crisis, at about 147p, shareholders are also likely to hold on for kinder winds.