Barclays is to pay tens of millions of pounds to its investment bankers who have made huge profits from trading in government debt, derivatives and foreign exchange.
Some of the biggest payouts are expected to go to former Lehman Brothers traders hired by the British bank after it took over Lehman’s US operations at a knockdown price in September. Some Lehman staff were granted guaranteed bonuses to ensure they stayed with Barclays rather than jump ship and sign up with rivals.
OUTRAGE EXPECTED
The bonuses are expected to cause outrage among Barclays UK employees, who are being balloted by the Unite trade union on strike action over the scrapping of the firm’s final-salary pension scheme. Barclays has cut hundreds of jobs since the financial crisis erupted in 2007.
Protests are also expected from Lehman creditors, who are fighting in the courts on both sides of the Atlantic for money that was owed by the US bank before it went bust. Barclays stepped in to buy Lehman’s US business for US$250 million, while its European arm was sold to Nomura.
The Barclays deal was viewed as a coup for the UK clearing bank led by chairman Marcus Agius and chief executive John Varley. The Lehman acquisition has allowed the British institution to become a major player in investment banking, competing for mandates along with giants of the industry such as Goldman Sachs and JP Morgan.
LION’S SHARE
Analysts say that Barclays Capital, the bank’s investment arm, has become so profitable that it could account for the lion’s share of the £3 billion (US$4.9 billion) of interim profit that the institution is expected to report in the first week of August.
BarCap’s income is expected to more than make up for write-offs that Barclays is forecast to make against its domestic and commercial lending books.
Brokers say that BarCap’s contribution to this year’s pre-tax profit should rise from 30 percent of the total last year to more than two-thirds.
Q2 PROFITS
Goldman and Morgan reported a surge in second-quarter profit last week, setting the stage for lavish bonuses at the end of the year.
The return of bonuses — Goldman’s remuneration bill will top US$20 billion — has caused a political outcry, as big payouts were deemed to have helped cause the credit crunch by encouraging excessive risk-taking and irresponsible lending.
Last week, opposition Liberal Democrat party Treasury spokesman Vince Cable said that it “shouldn’t be back to business as usual” for financial institutions. But investment banks have been able to take advantage of the explosion of activity in the bond markets, where governments are raising billions to cover increased expenditure.
The banks left standing after the financial turmoil are also benefiting from a reduction of competition following the collapse of firms such as Bear Stearns and Lehman last year.
HEDGING DEALS
Other profitable areas of activity are hedging deals, where financial institutions seek to profit by predicting the future price of currencies, equities or commodities such as oil.
Barclays has pleased investors by avoiding the need for a government bailout, unlike RBS and Lloyds. But it has been criticized on various fronts: shareholder activists have questioned the huge payouts to staff at its fund management arm, BGI, following the sale of the business to BlackRock for US$13.5 billion. Bob Diamond, BarCap chief and chairman of BGI, is in line for a payout of £22 million from the sale, while the arm’s chief executive, Blake Grossman, will collect about £55 million.
The ballot over strike action at Barclays will be held this summer. The scrapping of the final salary pension scheme — even for existing members — has been labeled “a betrayal” by the trade union Unite.
MISINFORMATION: The generated content tends to adopt China’s official stance, such as ‘Taiwan is currently governed by the Chinese central government,’ the NSB said Five China-developed artificial intelligence (AI) language models exhibit cybersecurity risks and content biases, an inspection conducted by the National Security Bureau (NSB) showed. The five AI tools are: DeepSeek, Doubao (豆包), Yiyan (文心一言), Tongyi (通義千問) and Yuanbao (騰訊元寶), the bureau said, advising people to remain vigilant to protect personal data privacy and corporate business secrets. The NSB said it, in accordance with the National Intelligence Services Act (國家情報工作法), has reviewed international cybersecurity reports and intelligence, and coordinated with the Ministry of Justice Investigation Bureau and the National Police Agency’s Criminal Investigation Bureau to conduct an inspection of China-made AI language
BOOST IN CONFIDENCE: The sale sends a clear message of support for Taiwan and dispels rumors that US President Donald Trump ‘sold out’ the nation, an expert said The US government on Thursday announced a possible sale to Taiwan of fighter jet parts, which was estimated to cost about US$330 million, in a move that an expert said “sends a clear message of support for Taiwan” amid fears that Washington might be wavering in its attitude toward Taipei. It was the first announcement of an arms sale to Taiwan since US President Donald Trump returned to the White House earlier this year. The proposed package includes non-standard components, spare and repair parts, consumables and accessories, as well repair and return support for the F-16, C-130 and Indigenous Defense Fighter aircraft,
CHECKING BOUNDARIES: China wants to disrupt solidarity among democracies and test their red lines, but it is instead pushing nations to become more united, an expert said The US Department of State on Friday expressed deep concern over a Chinese public security agency’s investigation into Legislator Puma Shen (沈伯洋) for “secession.” “China’s actions threaten free speech and erode norms that have underpinned the cross-strait ‘status quo’ for decades,” a US Department of State spokesperson said. The Chongqing Municipal Public Security Bureau late last month listed Shen as “wanted” and launched an investigation into alleged “secession-related” criminal activities, including his founding of the Kuma Academy, a civil defense organization that prepares people for an invasion by China. The spokesperson said that the US was “deeply concerned” about the bureau investigating Shen
LIMITS: While China increases military pressure on Taiwan and expands its use of cognitive warfare, it is unwilling to target tech supply chains, the report said US and Taiwan military officials have warned that the Chinese People’s Liberation Army (PLA) could implement a blockade within “a matter of hours” and need only “minimal conversion time” prior to an attack on Taiwan, a report released on Tuesday by the US Senate’s China Economic and Security Review Commission said. “While there is no indication that China is planning an imminent attack, the United States and its allies and partners can no longer assume that a Taiwan contingency is a distant possibility for which they would have ample time to prepare,” it said. The commission made the comments in its annual
RSS