The 15% drop in profits follows costs of US trading blunder and money being set aside for defaults by borrowers
Barclays staff will receive £1.2bn in bonuses in 2023 despite a 15% fall in the bank’s annual profits after it was knocked by the costs of a US trading blunder and extra money being set aside for a potential rise in defaults by borrowers.
The bank disclosed in its annual report on Wednesday that its staff bonus pool would go relatively unaffected, with best performers to share £1.2bn between themselves for their work in 2022. That has dropped only 3% in comparison to last year. Including deferred bonuses, the pool reduced 8% at £1.8bn.
Barclays made multimillion-pound payouts to its highest-earning bankers, with 348 getting more than €1m last year.
Twenty were received over €5m (£4.4m) each, while one unidentified banker earned more than €11m, according to documents disclosed alongside the Barclays annual report. That is more than the £5.2m that its chief executive, CS Venkatakrishnan, was earned last year, including his £2m bonus.
Venkatakrishnan has been subjected to cancer treatment in the US. He is still heading the bank but fellow executives have assumed additional responsibilities while he is away.
The chief financial officer, Anna Cross, said the comparatively small cut to the bonus pool indicated the fact that the bank was “really pleased” with overall performance, and that pre-tax profits would have increased 9% had it not been for a rise in the amount of money set aside to cover a potential jump in defaults.
Overall, Barclays posted a near 15% fall in pre-tax profits to £7bn for the whole of last year, down from £8.2bn the prior year. That fell short of analysts’ expectations of £7.2bn in annual profits. The figures discouraged investors, leading to an 8% drop in Barclays’ share price in early trading on Wednesday.
Barclays’ profits were hurt, in part, by the £1.2bn it set aside for a potential rise in defaults by customers, who are deemed more at risk of falling behind on payments given the uncertain economic outlook. In 2022, Barclays released £653m from its cash cushion as conditions seemed to improve after Covid restrictions relaxed.
However, Cross said the biggest majority of borrowers were making payments on time, despite the rise 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 hit by £1.6bn in legal and misconduct charges. That figure includes the costs of resolving a trading blunder that resulted in the sale of US securities that Barclays had not been permitted to sell. Barclays not only had to pay a US fine for the error but also had to buy back the securities it improperly sold.
These charges cancel a 30% jump in net interest income, which mainly compounds the difference between what the bank charges for loans and what it pays in interest on deposits.
Banks have profited from the rise in interest rates, but Barclays, along with other high street lenders, have denied defrauding savers by failing to hike interest rates on savings accounts at the same speed as those for loans and mortgages.
Buy Crypto NowBarclays’ investment bank posted a fall in profits in 2022, with fees falling 46% because of a fall in demand for stock market floatations and merger and takeover deals during the economic downturn.
Activists, meanwhile, criticized at the bank’s updated climate policy, which was disclosed alongside the annual results on Wednesday. While the bank revealed further restrictions in its financing for firms involved in carbon-heavy tar sands developments in countries such as Canada, it failed to include any new policies further hampering 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.”
