Barclays will axe thousands of jobs and raise bonuses for its investment bankers this year, the under-fire British lender announced on Tuesday after posting a return to annual profits.
Chief executive Antony Jenkins, who has himself declined a huge bonus as Barclays is probed along with other banks over possible manipulation of foreign exchange trading, said that between 10,000 and 12,000 jobs would be cut worldwide this year.
Barclays said it paid 2.4 billion pounds ($3.9 billion) in incentive awards last year, raising bonuses at the investment bank by 13 percent despite a slump in its profits. The average bonus for the investment bank's 26,200 staff was 60,100 pounds.
Critics of the bonus hike said it showed Britain's biggest banks were still failing to heed the lessons of a financial crisis caused by dangerous risk taking and excessive pay.
Barclays, which is seeking to repair a reputation badly damaged by its role in the Libor interest rate-rigging scandal of 2012, increased the money available for staff bonuses by almost 10 percent to £2.378 billion ($3.907 billion, 2.858 billion euros).
While net profits rose, the investment bank unit reported a loss in the fourth quarter, while pre-tax earnings slumped as Barclays factored in restructuring costs and litigation charges.
Along with other British lenders, Barclays has been hit by massive compensation payouts to customers who were mis-sold insurance policies.
"Despite challenging conditions, our underlying performance has been resilient and momentum is building, as evidenced by the results," Jenkins said in comments accompanying the results.
Defending its bonus payouts, the bank said it was being competitive in "ensuring that Barclays has the right people in the right roles".
Barclays, which is Britain's second biggest bank after HSBC, announced on Tuesday that a strong performance by its retail arm helped lift group profit after tax to £540 million last year, compared with a net loss of £624 million in 2012.
"WE NEED THE BEST PEOPLE"
The higher bonuses lifted the compensation-to-income ratio in the investment bank to 43.2 percent last year from 40 percent in 2012. Jenkins, who gave up his own bonus for 2013, said he still aimed for a ratio in the "mid-30s" across the bank.
He defended the bigger bonus pot, saying the bank had to recruit the best staff to compete with global rivals and continued to have "constructive" talks with investors over pay.
"We need to recruit people from Singapore to San Francisco. We need the best people in the bank to drive long-term sustainable returns for our shareholders," Jenkins told reporters on a conference call.
"I understand that there will be some (people) who feel that this decision is the wrong one for Barclays. But it is the decision of the board and myself that this entirely is the right decision for the group and in the long-term interests of shareholders," he said.
But business leaders' group the Institute of Directors said the bank's bonus policy raised the question of whether it was being run for its shareholders, or its staff.
"It cannot be right in any business for the executive bonus pool to be nearly three times bigger than the total dividend pay out to the company's owners," said Roger Barker, the institute's director of corporate governance.
Britain's opposition Labor party said the pay-outs underlined the case for a new tax on banker bonuses, which it would use to fund work for unemployed young people.
INVESTMENT BANKING LOSS
Jenkins said banking was going through a "100-year transformation" as technology and cost pressures reshape the industry, and he was optimistic that Barclays was well set for a "pivotal" 2014.
The bank said 820 senior roles would go, and half of those were cut at the investment bank in the last two weeks. Half of the affected staff in the UK had already been notified.
It cut 7,650 jobs last year, including 1,400 in the investment bank, as part of a restructuring unveiled a year ago by Jenkins to cut 1.7 billion pounds of annual costs. There were 139,600 Barclays employees by the end of the year.
Investment bank income fell 9 percent last year to 10.7 billion due largely to a fall in fixed income.
The investment bank made a loss of 329 million in the fourth quarter, hit by restructuring costs, a 220-million-pound charge for litigation and regulatory penalties and a 333 million cost to pay a UK bank levy.
Revenue in the fourth quarter from fixed income, currencies and commodities fell 16 percent from a year ago, echoing the weak performance across investment banks and not as steep a fall as seen at big rival Deutsche Bank. Barclays' equities income rose 9 percent from a year ago, and advisory and underwriting income fell 5 percent.
Barclays had already released headline results showing its earnings dropped by a third last year to 5.2 billion pounds, falling short of analyst forecasts due to the investment bank's slump.
The bank is successfully cutting its balance sheet, analysts said, and 196 billion pounds in the second half of last year was more than double its target, helped by 55 billion due to foreign exchange movements. Barclays said it would aim to cut at least another 63 billion pounds to get the balance sheet below 1.3 trillion pounds, based on the UK regulator's calculation of leverage exposure.
Barclays said it expected to improve its leverage ratio to at least 3.5 percent by the end of next year, from just under 3 percent at the end of last year and 2.2 percent at the end of June. The UK regulator forced Barclays to raise 6 billion pounds from investors in October to improve the leverage ratio.
The bank said it remained committed to paying out 40-50 percent of its adjusted earnings in dividends.
SHARE PRICES SLIDE
Barclays shares slumped 1.91 percent to 269.75 pence on London's benchmark FTSE 100 index, which was showing a gain of 0.79 percent at 6,643.34 points in morning deals.
"Underneath the Barclays bonnet, performances are mixed," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
"More positively, the capital cushion is now looking robust, the credit impairment position has improved further, the bank continues to pay a dividend unlike some of its rivals... and certain pockets of the business such as UK Retail made a robust contribution."
Retail banking veteran Jenkins replaced Bob Diamond, who stepped down as chief executive of Barclays in July 2012 after the bank was fined £290 million by British and US regulators over the attempted manipulation of the key interbank Libor interest rate.
US national Diamond was renowned for overseeing a culture of high bonuses at Barclays' investment banking division, which he headed before taking over as chief executive.
Barclays took the unusual step of posting its headline and adjusted pre-tax profits on Monday, a day earlier than scheduled, after figures were leaked to media.
While statutory pre-tax profits surged last year, adjusted earnings dropped and missed the bank's own forecast amid the group's cost-cutting.
Reported profit before tax hit £2.9 billion in 2013, while adjusted pre-tax profit, which the bank said took into account exceptional charges, slumped to £5.2 billion.
Barclays has set aside an additional £331 million in provisions to cover litigation and regulatory charges.
And last year it was forced into a huge £5.8-billion shares sale, or rights issue, to meet regulatory demands to strengthen its capital buffers.
"Barclays tried to stagger the bad news by unexpectedly revealing the headline (pre-tax profit) figure yesterday, but announcing jobs cuts and increasing the bonus pool has backfired on the bank's share price," said David Madden, market analyst at traders IG.
In a fresh blow, Britain's data watchdog on Sunday launched a probe after confidential files relating to Barclays customers were allegedly stolen then sold on to rogue brokers.