Bar­clays cuts in­vest­ment bankers’ bonuses by 10 to 12%, and says it could have been worse.

National Post (Latest Edition) - - FINANCIAL POST - Stephen Mor­ris Am­bereen and Choud­hury

Bar­clays PLC cut the bonus pool for its in­vest­ment bank by about 10 per cent to 12 per cent, ac­cord­ing to peo­ple with knowl­edge of the mat­ter.

In­di­vid­ual em­ployee vari­able pay for 2015 would have dropped more if the Lon­don­based bank wasn’t cut­ting 1,200 jobs world­wide and clos­ing op­er­a­tions across Asia, said the peo­ple, who asked not to be iden­ti­fied be- cause the com­pen­sa­tion plan isn’t yet pub­lic. For 2014, the in­vest­ment bank paid out 24 per cent less in bonuses, with the pool fall­ing to one bil­lion pounds ($1.9 bil­lion).

The se­cu­ri­ties unit is in a pe­riod of flux as Tom King, who has been the sole head of the in­vest­ment bank for al­most two years, pre­pares to leave on March 4. Two months into the job, Bar­clays chief ex­ec­u­tive Jes Sta­ley has al­ready taken an axe to the unit with the low­est re­turns, an­nounc­ing thou­sands of ad­di­tional job cuts and the clo­sure of most of its Asian out­posts, while im­pos­ing a hir­ing freeze to re­strain costs.

Bar­clays faces pres­sure to per­suade top-per­form­ing em­ploy­ees to re­buff the ad­vances of U.S. banks, which are keep­ing their bonus pools flat as in­come is buoyed by a more prof­itable do­mes­tic mar­ket. Bar­clays is set to re­port that rev­enue at its in­vest­ment bank de­clined in the fourth quar­ter, and Sta­ley, 59, and chair­man John McFarlane, 68, are sched­uled to present a broader strate­gic up­date along­side the bank’s full-year re­sults on March 1.

The stock fell three per cent to close at 156.75 pence in Lon­don Wed­nes­day, ex­tend­ing its de­cline to 28 per cent this year.

Jon Lay­cock, a Lon­don­based spokesman for Bar­clays, de­clined to com­ment on the bonus pool.

The firm is con­sid­er­ing can­di­dates from in­side and out­side the firm, and would pre­fer a per­son with a mar­kets back­ground to re­place King, one of the peo­ple said.

In­ter­nal can­di­dates in­clude Joseph Gold, head of the in­vest­ment bank in the U. S.; Joe McGrath, the New York-based co-head of bank­ing; and Joe Cor­co­ran, the in­vest­ment bank’s head of mar­kets, the peo­ple said. None of the po­ten­tial re­place­ments re­sponded to emails or tele­phone calls seek­ing com­ment. Lay­cock, the Bar­clays spokesman, also de­clined to com- ment on the can­di­dates.

The bank will pay bonuses in March, later than the usual mid-Fe­bru­ary tim­ing, peo­ple fa­mil­iar with the mat­ter have said.

In the first nine months of 2015, the in­vest­ment bank posted a 31-per-cent in­crease in pre­tax profit com­pared with the same pe­riod a year ear­lier. For­mer CEO Antony Jenk­ins and King re­struc­tured the in­vest­ment bank in May 2014, mov­ing bil­lions of un­wanted or toxic as­sets and busi­nesses into a non- core unit to be sold off.

As a re­sult, the divi­sion’s per­for­mance is not pre­cisely com­pa­ra­ble be­tween 2015 and 2014.

The chair­man said Bar­clays can’t clamp down se­verely on com­pen­sa­tion, be­cause it would leave the bank at a com­pet­i­tive dis­ad­van­tage. “In or­der to mo­ti­vate them we have to pay them,” he said. If Bar­clays cut salaries and bonuses, “all that hap­pens is you lose your best peo­ple.”

Cit­i­group Inc. and JPMor­gan Chase & Co. planned to leave their 2015 bonus pools un­changed from 2014, moves that put pres­sure on Euro­pean ri­vals with lower prof­itabil­ity, peo­ple fa­mil­iar with the de­ci­sions said last year.

Some Euro­pean firms’ bankers will have a worse bonus sea­son than Bar­clays staff. At Credit Suisse Group AG, whose shares trade at a 25- year low, CEO Tid­jane Thiam has re­duced vari­able pay by 11 per cent, with bonus cuts of more than 30 per cent at un­der­per­form­ing divi­sions.

Deutsche Bank AG, which re­ported its first ful­lyear loss since 2008, has said man­age­ment board mem­bers won’t re­ceive a bonus for 2015, while the in­vest­ment bank bonus pool has been said to be con­sid­ered for a re­duc­tion of al­most a third.

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