Bonuses fall at Barclays' investment bank, but more get €1m+
Today's news that Barclays' CEO Jes Staley is being investigated by the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority for his relationship with the deceased alleged paedophile, sex-trafficker and financier Jeffrey Epstein, has somewhat drawn attention away from Barclays' other big news today: its fourth quarter results. Barclays insiders may even have been momentarily distracted from thoughts of their bonuses.
This may be just as well. Despite a 14% increase in profits at Barclays' corporate and investment bank (CIB) this year, today's figures suggest bonuses for senior staff in the unit are down around 13%.
Barclays doesn't break out the total size of its investment banking bonus pool. However, it does divulge 'variable pay' awarded to material risk takers in its international business, which includes the CIB and consumer cards and payments. Material risk takers in the international business are concentrated in the investment bank and are typically managing directors and senior traders. In 2019, the variable compensation pool at Barclays International fell 13%, to £482m ($625m).
Average salaries, bonuses and total compensation for material risk takers in Barclays' international in 2019 are shown in the table below. (As ever, if you can't see the table on mobile, please view it on a desktop.) The average senior banker or trader who got a bonus at Barclays last year received £557k, down from £636k one year earlier. However, they may have felt lucky to get a bonus at all: 173 material risk takers in Barclays' international business received no bonus at all in 2019, up from 124 in 2018.
It wasn't all bad for Barclays' senior bankers and traders though. Barcays also disclosed today that 537 of its people globally earned more than €1m last year and that nine earned between €6m and €7m. In 2018 only 430 people at Barclays earned more than €1m and seven earned between €6m and €7m. The implication is that Barclays is skewing pay towards its high performers.
Do they deserve it? Barclays clearly thinks so. As the chart below shows, Barclays outperformed peers in every area but equities sales and trading last year. However, the cost income ratio in the corporate and investment bank was still 70% in 2019 - above the 60% target Barclays has for the medium term. Equally, the return on equity in the invesment bank was 7.6%. While this was better than in 2018, it's still below the cost of capital. In other words, Barclays' investment bank still needs to cut costs.
Barclays' senior bankers and traders may be hoping that Jes Staley, who has long been a cheerleader for the investment bank, is the man who oversees this cutting. The bank's board is supporting Staley, who it says has been entirely transparent about his relationship with Epstein with whom he had an entirely professional relationship dating back to Epstein's days as a private client when Staley was at JPMorgan. If Staley were to leave Barcalys, pay in the investment bank could fall further still: before he arrived as CEO in 2015 just 323 people at Barclays earned over €1m; high earners at Barclays have increased 66% during his tenure.