Barclays' profits fall 3%, bonus pool shrinks by 26%

Barclays made a pre-tax profit of £5.879bn in the year to 31 December 2011, 3% down from the previous year and a slightly larger fall than analysts had forecast.

Adjusted profit before tax was £5.59bn down 2% from 2010. Barclays has cut bonuses across the group by 26%, with total bonuses payments across Barclays Capital down 35% for the year.

The bank’s dividend per share climbed 9% to 6p from the previous year, and its core tier one ratio rose from 10.8% to 11%.

It also reduced sovereign exposure to Spain, Italy, Portugal, Ireland and Greece from £8.2b to £7.1bn for the reporting period.

There was no immediate news on the bonus for its chief executive Bob Diamond, who had been reportedly in line for an incentive worth several million pounds.

Last month, RBS chief executive Stephen Hester turned down his bonus, worth nearly £1m. Barclays' total bonus pot for the year will now be about £2.15bn, with cash bonuses capped at £65,000.

The bank, the UK's fourth largest by market value, received no injection of state aid during the financial crisis, the BBC reports.

Diamond said he is not satisfied with the return the bank delivered to shareholders over the last year and is looking to address this.

“Barclays’ universal banking model continues to be a competitive strength. Revenues remained resilient overall, reflecting the strength of our customer franchise and the balanced mix of our business. We have intensified our cost discipline while selectively investing in growth areas that support our execution priorities,” he said.

“We are not satisfied with the return on equity we delivered in 2011 and are committed to delivering steady improvement moving forwards. Our rock solid capital, liquidity and funding positions provide us with the flexibility and confidence to meet the economic and regulatory challenges ahead.”

The bank's shares were 1.1% higher at 237p in early trading.

Cavendish Asset Management's Paul Mumford sold out of Barclays this week ahead of the final results as he expected them to disappoint.

He still holds Lloyds and RBS in the £56m Cavendish Opportunities fund.
"Barclays has risen 70% since September. It may have another 10% to go but I am happy to leave it for the next man. If Greece goes wrong we could see downside," he said.

"I have switched into Royal Sun Alliance, and I also hold Aviva in the insurance space. They have come back to a fundamentally attractive level after taking a battering," he added.

Walker Crips duo Jan Luthman and Steve Bailey have also now sold all the banks in their Equity Income and UK Growth portfolios, including Barclays and HSBC.

In March 2011 they re-introduced Barclays to their portfolios for the first time in nearly four years  but sold out of the stock during a Q4 rally, in anticipation of falling profits and a tougher operating environment for the bank.

Luthman said the banking sector looks "opaque", and he would not be comfortable putting investors' cash there.

"The markets had been over-enthusiastic about the hostile environment in which Barclays was operating.

"If the European banks were forced to mark to market, they would be insolvent. The ECB is keeping them alive through the LTRO - Mario Draghi is like Wilfrid Brambell, collecting any old junk from the eurozone banks.

"But the LTRO is only a three-year loan, so at some point the banks will have to take the loans back onto their balance sheets and find a way to raise capital, which will impair returns for shareholders," Luthman said.

"It is a profoundly opaque, and it is for a reason - they do not want investors to see that these banks really are bust, and in that situation, it would not be appropriate to put our unitholders' money there."