Business

Barclays Bank profits fall 3% to £5.9bn

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Media captionBarclays Bank has announced a slight drop in its annual pre-tax profits - but still banked nearly £6 billion last year

Barclays has reported a 3% fall in profits to £5.9bn for last year, hit by a slowdown at its investment bank arm.

The bank also said the bonus pool at the investment banking division was down 32% to £1.5bn in 2011.

Chief executive Bob Diamond declined to discuss his own bonus during a news conference.

But senior executives will see bonuses cut about 48%, which BBC business editor Robert Peston says would give Mr Diamond about £3m.

Barclays' total bonus pot for the year will now be about £2.15bn, down 25%, with cash bonuses capped at £65,000.

The average bonus payout for a Barclays' employee fell 21% year-on-year to £15,200.

At a press conference, Mr Diamond avoided questions about his own bonus. "This [news conference] is about results today," he said.

Nor would he discuss critical comments from the Association of British Insurers', which lobbies on behalf of some of the UK's biggest investors, the pension funds.

Robert Talbut, chairman of the ABI's investment committee, said: "Whilst overall bonus levels at Barclays have been reduced, for Barclays Capital this reduction is only in line with the fall in profit before tax at BarCap.

"This appears to be very close to business as usual. It is not the signal of the change required in order to improve the investment case," he said.

Barclays, the UK's fourth largest bank by market value, received no injection of state aid during the financial crisis and had previously indicated that it felt under no obligation to cut bonuses.

But its results come after weeks of conflict over bonuses, in which RBS chief Stephen Hester turned down £963,000 worth of shares, and Lloyds Banking Group head Antonio Horta-Osorio waived his own payout following a leave of absence.

'Challenging' environment

Income at investment bank arm Barclays Capital (BarCap) fell to £1.8bn in the fourth quarter of last year, down 19% on the previous three months. The eurozone debt crisis hit the division's bond trading activity.

Mr Diamond said in a statement: "Against a backdrop of challenging economic and market conditions, we maintained our focus."

However, the adjusted return on equity was 6.6% for the year, down from 6.8% in 2010 and well below its target of 13%.

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Media captionAnalyst Ralph Silva: "Barclays is doing much better than the vast majority of banks"

"We are not satisfied with the return on equity we delivered in 2011 and are committed to delivering steady improvement moving forwards," Mr Diamond said.

"We expect the economic and regulatory environment to continue to be challenging in 2012," he added.

Barclays said losses on bad loans fell by a third from 2010 to £3.8bn.

The bank said it had exceeded its targets on lending to UK businesses under the Project Merlin programme, with £43.6bn of gross new lending to businesses, including £14.7bn to small and medium size firms.

The bank also said it had strengthened its Tier 1 capital ratio - money held in reserve as a buffer against financial troubles - to 11%.

Analyst Richard Hunter, of head of equities at Hargreaves Lansdown Stockbrokers, gave a cautious welcome to the results.

"Barclays has dodged some, but not all, of the bullets which have come its way," he said.

"These are difficult times and the results mirror challenges already reported by other global banks of late.

"The significant drop in revenue at Barclays Capital was largely trailed but nonetheless dents overall progress."

Barclays, whose shares rose 4% in morning trading, is the first of the big UK banks to report its annual profits.

Meanwhile, Lloyds Banking Group said on Friday that it had also beaten the Project Merlin targets laid down by the government for lending to small businesses.

Lloyds, 40%-owned by the government, said it had lent £12.5bn to small-and-medium-sized enterprises in 2011, ahead of a £11.7bn target under the Merlin deal.

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