Barclays staff will share £1.2bn in bonuses this year despite a 15% drop in the bank’s annual profits after it was hit by the costs of a US trading blunder and more money being put aside for a potential jump in defaults by borrowers.
The bank revealed in its annual report on Wednesday that its staff bonus pool would go relatively untouched, with top performers to share £1.2bn between themselves for their work in 2022. That is down only 3% compared with last year. Including deferred bonuses, the pool was down 8% at £1.8bn.
Barclays made multimillion-pound payouts to its highest-earning bankers, with 348 receiving more than €1m in 2022.
Twenty were paid more than €5m (£4.4m) each, while one unidentified banker was took home more than €11m, according to documents released alongside the Barclays annual report. That is more than the £5.2m that its chief executive, CS Venkatakrishnan, received for 2022, including his £2m bonus.
Venkatakrishnan has been undergoing cancer treatment in the US. He is still running the bank but fellow executives have taken on extra responsibilities while he is away.
The chief financial officer, Anna Cross, said the relatively small cut to the bonus pool reflected the fact that the bank was “really pleased” with overall performance, and that pre-tax profits would have been up 9% had it not been for a jump in the amount of money put aside to cover a potential rise in defaults.
Overall, Barclays reported a near 15% drop in pre-tax profits to £7bn for the whole of 2022, down from £8.2bn a year earlier. That was lower than analysts’ expectations of £7.2bn in annual profits.
The figures disappointed investors, resulting in an 8% fall in Barclays’ share price in early trading on Wednesday.
Barclays’ profits were hit, in part, by the £1.2bn it put aside for a potential increase in defaults by customers, who are considered more at risk of falling behind on payments given the uncertain economic outlook. Last year, Barclays released £653m from its cash cushion as conditions appeared to improve after Covid restrictions lifted.
However, Cross said the vast majority of borrowers were making payments on time, despite the surge in living costs. “There is no doubt that this is a significantly difficult environment for some customers in terms of inflation. But that’s not translating through to adverse credit behaviour. So we are not seeing increases in arrears. If anything, they are lower than they were, and very stable.”
Barclays’ profits were also knocked by £1.6bn in legal and misconduct charges. That figure includes the costs of rectifying a trading blunder that led to the sale of US securities that Barclays had not been authorised to sell. Barclays not only had to pay a US fine for the error but also had to buy back the securities it wrongly sold.
These charges offset a 30% rise in net interest income, which primarily accounts for the difference between what the bank charges for loans and what it pays in interest on deposits.
Banks have benefited from the surge in interest rates, but Barclays, alongside other high street lenders, have denied shortchanging savers by failing to increase interest rates on savings accounts at the same pace as those for loans and mortgages.
Barclays’ investment bank recorded a drop in profits last year, with fees falling 46% owing to a drop in demand for stock market floatations and merger and takeover deals during the economic slowdown.
Activists, meanwhile, hit out at the bank’s updated climate policy, which was released alongside the annual results on Wednesday. While the bank announced further restrictions in its financing for companies involved in carbon-heavy tar sands developments in countries such as Canada, it failed to include any new policies further restricting financing for oil and gas.
“Today Barclays has failed to do what nearly every major UK bank has done, which is start the process of ending financing for new oil and gas”, said Beau O’Sullivan, a senior strategist for the Bank on our Future climate campaign group. “As regulation clamps down on fossil fuel use and the world moves towards cleaner energy sources, Barclays is swimming against the tide of progress well behind its peers.”
