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Barclays bank posts profits, reins in bonuses
2009-02-09
LONDON (AFP) - Britain's Barclays bank on Monday posted healthy 2008 profits but ruled out paying bonuses to top directors amid mounting public anger about banking sector pay in recession-hit Britain. Barclays said in a results statement it had overcome writedowns and losses of 8.1 billion pounds (11.8 billion dollars, 9.1 billion euros) last year to post net profits that were only slightly below the level of 2007. Net profit, boosted by one-off gains including the acquisition of the North American operations of bankrupt Lehman Brothers, eased one percent to 4.382 billion pounds in 2008. That was far higher than market expectations for net profit of 3.53 billion pounds, according to Dow Jones Newswires. "In a very difficult economic environment in 2008, Barclays has steered a course that has enabled us to be solidly profitable despite strong headwinds," the bank said in an earnings release on Monday. For 2009, Barclays forecast another challenging year but said that its credit market losses would be lower than in 2008. Barclays shares surged 10.88 percent to close at 116.20 pence on London's FTSE 100 index, which ended the day 0.37-percent higher at 4,307.61 points. Pre-tax profits slid 14 percent to 6.077 billion pounds. However, that was higher than the 5.3 billion pounds the bank had forecast last month in an open letter to shareholders after its share price had nosedived. Britain's banking sector was hammered last year by the international credit crunch amid fears about the sector's exposure to toxic debt. But Barclays, unlike rivals Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG), has managed to avoid taking government cash. Instead, last year it sold around one third of its stock to investors from Abu Dhabi and Qatar. Barclays has not received direct state capital but it has benefited from state guarantees and liquidity from the Bank of England. Monday's results, which sent Barclays' shares shooting higher, came one day after the British government said it would probe the link between bank bonuses and excessive risk-taking. Barclays' chief executive John Varley on Monday said his bank would shake-up its bonus scheme and would not pay a shareholder dividend for 2008 because of the need to hold cash. "Executive directors will receive no bonuses for 2008. For 2009 and beyond, we are reviewing our compensation policies and practices to ensure that they evolve appropriately," Varley said. British finance minister Alistair Darling had Sunday announced an investigation into whether the promise of big bonuses lured bankers into taking excessive risks, precipitating the global financial crisis. In a review of how banks are managed the Treasury department said the former regulator of London's financial district, David Walker, would also report on how bank boards operate and on Britain's general approach to banking. Britain has already launched two rounds of bank bailouts worth hundreds of billions of pounds that have seen the government take huge stakes in household names such as RBS and Lloyds. Compensation systems and bonuses for bankers -- seen as having encouraged reckless risk-taking during the boom years -- are under scrutiny in the new crisis environment, particularly at banks that have received government help. Barclays' result for 2008 included several one-off gains that helped compensate for the losses on its loan book, in particular a 2.3-billion-pound gain on its acquisition of Lehman Brothers' North American business. Under a 1.75-billion-dollar deal last year, Barclays acquired Lehman's investment banking and trading units and a skyscraper the bankrupt US firm occupied in Manhattan.
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