British bank Barclays is set to miss a key profit target after its investment bank ended last year with its worst quarter for three years.
A slump in bond trading income as a result of the eurozone debt crisis dragged down annual profit, prompting Barklays Chief Executive Bob Diamond to push back a return on equity (ROE) target of 13 percent he set less than a year ago.
“The idea of 13 percent is pie in the sky, and even getting to 10 percent is a long way away,” said Alex Potter, analyst at Berenberg Bank. Return on equity is a measure of profitability.
Rivals including Credit Suisse, UBS and Deutsche Bank all struggled to maintain profitability in their investment banks last year, hit by volatile trading and tougher regulations.
Diamond did not abandon his ROE target, but said: “Thirteen percent remains absolutely the right target and it’s very achievable, but we may not achieve it in 2013 given the impact of the external environment.”
The bank’s ROE of 5.8 percent last year, from 7.2 percent in 2010, was “unacceptable,” he said.
Barclays said it had cut bonuses at investment banking division Barclays Capital (BarCap) by 32 percent from the year before, and incentive awards across the group were down 26 percent.
BarCap’s bonus pool was ￡1.5 billion (US$2.4 billion), or an average of ￡64,000 across its 24,000 staff. Across the group the average bonus was ￡15,200.
Barclays is the first of the big British banks to report results and has come under pressure to rein in pay for bankers, and for Diamond,
Diamond, who became chief executive a year ago after a decade building up BarCap, has for years been one of Europe’s best paid bank executives and has faced calls to forgo his bonus.
Barclays, Britain’s fourth-biggest bank by market value, reported a pretax profit of ￡5.9 billion for last year, down 3 percent on the year and below analysts’ forecasts of 6.1 billion, according to a company poll.
Barclays shares fell in early trading, but bounced back and were up 3 percent at ￡2.40, after hitting their highest level since July.
Dealers said a weak performance in investment banking had been expected and investors were encouraged by decent performance in retail banking and a one-third fall in bad loans to ￡3.8 billion.
The bank also promised a final dividend of ￡0.03, more than expected.
Income at BarCap fell to ￡1.8 billion in the fourth quarter, down 19 percent on the previous quarter and almost half of its level a year ago. Income for the year was ￡10.3 billion, down almost a quarter on 2010.
A slump in bond trading and advisory work hammered all banks late last year, and BarCap fared worse than some US rivals but not as badly as Credit Suisse.
“The fourth quarter was certainly tough and all the second half was difficult, but we see that as an anomaly,” BarCap co-chief executive Rich Ricci said.
Ricci said he was still targeting annual BarCap income of ￡12 billion to ￡14 billion and an ROE for the division of 15 percent. “We’re not backing away from that,” he said.
BarCap’s fixed income, currency and commodities income in the fourth quarter fell 32 percent from the previous quarter, its equities income fell 10 percent and advisory income was up 30 percent.
The bank said it would cap the cash bonus for BarCap staff at ￡65,000 this year.
Total staff costs fell 4 percent to ￡11.4 billion from a year earlier, or an average of ￡73,800 per employee. The bank cut 6,400 jobs during the year.
“There remains an unacceptable disparity between the huge pay awards to the select few at the top of the organization and the majority of the workforce,” David Fleming at Unite trade union said.
TECH RACE: The Chinese firm showed off its new Mate XT hours after the latest iPhone launch, but its price tag and limited supply could be drawbacks China’s Huawei Technologies Co (華為) yesterday unveiled the world’s first tri-foldable phone, as it seeks to expand its lead in the world’s biggest smartphone market and steal the spotlight from Apple Inc hours after it debuted a new iPhone. The Chinese tech giant showed off its new Mate XT, which users can fold three ways like an accordion screen door, during a launch ceremony in Shenzhen. The Mate XT comes in red and black and has a 10.2-inch display screen. At 3.6mm thick, it is the world’s slimmest foldable smartphone, Huawei said. The company’s Web site showed that it has garnered more than
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
Vanguard International Semiconductor Corp (世界先進) and Episil Technologies Inc (漢磊) yesterday announced plans to jointly build an 8-inch fab to produce silicon carbide (SiC) chips through an equity acquisition deal. SiC chips offer higher efficiency and lower energy loss than pure silicon chips, and they are able to operate at higher temperatures. They have become crucial to the development of electric vehicles, artificial intelligence data centers, green energy storage and industrial devices. Vanguard, a contract chipmaker focused on making power management chips and driver ICs for displays, is to acquire a 13 percent stake in Episil for NT$2.48 billion (US$77.1 million).
RSS