Barclays CEO up for first bonus after two years
Barclays Plc's Antony Jenkins is poised to take his first bonus as chief executive officer after eliminating thousands of jobs in the U.K. bank's most aggressive cost cuts to date.
Jenkins turned down his first two bonuses and could now receive as much as 1.9 million pounds ($2.9 million), according to the bank's annual report. The bank's remuneration committee, led by non-executive John Sunderland, meets early next month to make the decision, said two people with knowledge of the matter who asked not to be identified because the matter is private.
"As U.S. and European firms are still paying bonuses, it would probably be a bit perverse for Jenkins not to when pretty much all other bank CEOs are," Colin McLean, founder and CEO of SVM Asset Management Ltd. in Edinburgh, who oversees more than $800 million, including Barclays shares. "He's got through the stress tests and the bank looks in good shape."
Jenkins, 53, announced plans to cut 14,000 jobs last year and sold the bank's consumer banking businesses in Spain and the United Arab Emirates, helping to reduce costs by 1.7 billion pounds to revive profitability. Jenkins, whose bank passed a set of European and British stress tests last year, succeeded Robert Diamond in 2012 after Britain's second-largest lender by assets was fined 290 million pounds for rigging Libor interest rates.
Analysts expect the lender to report full-year pretax profit of 5.6 billion pounds from 5.2 billion pounds a year earlier, according to the average estimate of 22 analysts compiled by Bloomberg. The bank is scheduled to report earnings on March 3. The shares rose 0.9 percent to 244.5 pence at 10:11 a.m. in London. Last year they dropped 10 percent, the second-worst performance among U.K. lenders after Standard Chartered Plc.
Will Bowen, a spokesman for Barclays, declined to comment on executives' pay. Sunderland couldn't be reached by telephone. Jenkins opted to forgo his bonus in the past two years after the Libor scandal, a 5.8 billionpounds rights offering, and probes into currency market manipulation. He still received shares valued at as much as 4.4 million pounds as part of a long-term incentive plan last year, four times his 1.1 million-pound salary, and a 363,000pound pension, according to the bank's annual report.
The CEO's package was amended for 2014, reducing his bonus to as much as 1.9 million pounds and his incentive plan to 2.9 million pounds, the report shows. The changes were made to accommodate 950,000 pounds of role-based pay, a cash allowance introduced in response to a European Union rule that limits bonuses to no more twice fixed salaries. The European Banking Authority said in October role-based payments are discretionary and therefore breach bonus rules, and U.K. regulators have yet to respond. The auguries are good from the U.S. JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) boosted the cash portion of their leaders' bonuses for the first time since 2010. JPMorgan's board gave CEO Jamie Dimon a $7.4 million cash reward -- his first since 2011 -- while keeping his total pay for 2014 unchanged at $20 million. The cash component of Goldman Sachs CEO Lloyd C. Blankfein's bonus was $7.33 million, about a third of the bonus in his $24 million package.
The only member of taxpayer-owned Royal Bank of Scotland Group Plc's executive committee likely to get a bonus this year is Rory Cullinan, who heads RBS's bad bank, a person with knowledge of the matter said Jan. 14.
Jenkins's turnaround plan, known as Transform, is showing signs of working. The bank passed European and Bank of England stress tests last year and is set to meet a common equity Tier 1 capital target, of 11 percent by 2016, a year ahead of schedule, the Financial Times reported in December. It's also reducing its leverage, or assets in relation to capital, "quicker than we anticipated," Finance Director Tushar Morzaria told analysts in October. "The significant part of the transformation of Barclays is already under way and in some parts com- plete," Jenkins said Thursday in an interview on Bloomberg Television at the World Economic Forum in Davos, Switzerland. The bank will "accelerate the execution of the strategy," he said.
Jenkins said the universal banking model of offering all services to clients, is "dead." Instead, all divisions of the bank must earn sufficient returns, he said. As part of this strategy, the bank targeted 7,000 jobs at its securities unit last year, about a quarter of the total, and created a bad bank to dispose of 115 billion pounds of assets including parts of its fixed income, currencies and commodities derivatives units.
Costs in the third quarter were the lowest in any threemonth period over the past five years. Total adjusted operating expenses fell to 4.3 billion pounds from 4.4 billion pounds a year earlier, the bank said in October.
"The management team, including Jenkins, will claim a bonus this year on the progress they've made on cost-cutting and restructuring," said Chirantan Barua, an analyst at Sanford C. Bernstein & Co., who rates the stock market perform. Barclays's investment bank performed better than some peers. Third-quarter pretax profit in Barclays's investment bank dropped 39 percent to 284 million pounds from a year earlier. RBS (RBS)'s corporate and institutional unit, which houses most of the investment-banking unit, posted a loss of 557 million pounds.