British bank Barclays said it plans to streamline operations to boost profitability as it grapples with tougher regulations, which it says will lower its returns.
The warning came as the bank yesterday reported a higher-than-expected 32 percent rise in annual earnings.
Bob Diamond, the US investment banker who took over as chief executive at the start of the year, said tougher regulations would result in lower returns and he was now targeting a 13 percent return on equity (ROE).
Diamond said he had instigated a “disciplined, rigorous and continuous review” of its portfolio to achieve that, after ROE sagged to just 7.2 percent last year.
Barclays said staff costs for last year rose by a fifth to ￡11.9 billion (US$19.09 billion), but bonuses fell by 7 percent, including a 12 percent fall at its Barclays Capital investment banking unit.
Barclays reported a pretax profit of ￡6.1 billion for last year, up from underlying profit of ￡4.6 billion in 2009 and ahead of the average forecast of ￡5.7 billion, according to Reuters estimates.
The rise was mainly thanks to reduced losses from bad debts, which fell 30 percent to ￡5.7 billion.
Revenues for BarCap were ￡3.4 billion in the fourth quarter, up 20 percent from the third quarter and recovering from several quarters of decline, faring better than rivals.
Diamond said the bank had a good start to this year, with group income and profit last month ahead of last year’s average monthly run rates.
The bank confirmed changes to the way it pays bonuses, saying that in future performance awards would be deferred over three years and would only be made if the group’s key core Tier 1 measure of capital strength was at least 7 percent.
The bank will not reveal the details of compensation to individual board members and its top performers until the publication of its annual report.