September 19, 2020

DealBook: Barclays Posts Weaker Profit as Investment Bank Slips

The British bank Barclays reported Wednesday that weaker investment banking performance caused its first-quarter profit to fall, setting the stage for sharp questions about its bonus plan at this year’s shareholder meeting.

The bank, based in London, posted £1 billion, or $1.65 billion, of net profit for the first three months of 2011, down 5 percent on the year-earlier figure. Top-line revenue fell 8 percent to £7.4 billion.

Barclays Capital, the investment bank, had revenue of £3.3 billion, down 15 percent from a year earlier, owing to a 22 percent decline in the unit’s fixed income, currency and commodities business. But revenue from the equities business gained 11 percent as stock markets rose.

Barclays noted that if a £351 million charge on its own debt were excluded, it would have posted £2 billion of overall pretax profit, up 10 percent.

‘‘We have made a good start in 2011 in a challenging external environment,’’ Bob Diamond, the chief executive, said in a statement.

Barclays executives, who are trying to revise the bank’s bonus policies, were preparing for hostile questioning later Wednesday at the company’s annual general meeting.

The Association of British Insurers, whose members include major institutional shareholders, has called on its members to closely review remuneration plans that would, among other things, give Mr. Diamond a base salary of £1.35 million — a 20 percent increase over that received by his predecessor, John Varley — and pay some bonuses with contingent capital securities, or ‘‘cocos.’’ Such bonds can be converted into equity if the bank runs into trouble, allowing it to add to its capital cushion.

Pensions Investment Research Consultants, a shareholder advisory group that had already criticized Barclays over what it characterized as “the complexity and opacity” of its remuneration policy, urged investors to seek answers from the bank over what appeared to be “£1.4 billion of bonuses awarded and the tax thereon that has not been put through the profit and loss account.”

The Independent Commission on Banking, a body backed by the British government, called this month for Barclays and other systemically important banks to hold more capital and protect individual clients from losses, but stopped short of calling for a separation of their retail and investment banking businesses.

While regulators have identified over-leveraging as one of the causes of the financial crisis, banks have resisted efforts to raise capital requirements, saying the measures would reduce their profits.

Mr. Diamond said that continuing the ‘‘constructive dialogue’’ with the I.C.B. was ‘‘an important priority’’ for the bank.

‘‘We are determined to play a responsible role in the formulation of the reform agenda and to facilitate economic growth in the U.K. by providing access to credit-worthy individuals and businesses,’’ the statement said.

Barclays said it raised its core Tier 1 capital ratio, a measure of its ability to withstand financial shocks, to 11 percent at the end of March, up from 10.8 percent at the end of December.

The bank said results were hit by a £532 million impairment charge the bank booked on Protium Finance, a holding vehicle for credit market assets that Barclays had sold to former employees.

The bank said it was now buying back the Cayman Islands-based vehicle.

Article source: http://dealbook.nytimes.com/2011/04/27/barclays-posts-weaker-profit-as-investment-bank-slips/?partner=rss&emc=rss

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