The FINANCIAL -- U.K. bank Barclays
PLC Friday said its 2011 full-year net profit slumped as the bank
pushed back a key growth target after a sharp drop in investment banking
revenue, according to Borsa Italiana - London Stock Exchange Group .
The London-based bank said net profit for 2011 fell 8% to GBP3 billion. Adjusted return on equity, a closely watched metric among investors and analysts, fell to 6.6% from 6.8% a year earlier, well below the bank's 2013 target of 13%. Barclays Chief Executive Bob Diamond said the bank's 2011 return on equity was "unacceptable" and warned that the 13% target might not be achieved by 2013.
The bank was hard hit as pretax profit in Barclays Capital, the bank's traditional earnings engine, fell 32% to GBP2.97 billion from GBP4.39 billion, as clients sat on the sidelines amid the euro-zone debt crisis.
Costs in the division also rose as employee pay outpaced revenue. The fall in revenue at this key business failed to offset a stronger performance of Barclays' retail and corporate divisions. Impairment charges fell 33% over the year to GBP3.8 billion from GBP5.67 billion, reflecting ongoing low interest rates that have made it easier for customers to keep repaying loans.
Barclays management pledged to continue cutting costs in a quest to improve profitability.
Barclays Capital said it cut its cash-and-share bonus pool by nearly a third to GBP1.5 billion as it looked to offset political scrutiny in the country of bank pay. Diamond didn't say whether he will receive a bonus. "This is about the results," he said.
Barclays slashed group-wide cash bonuses, including those of the top eight executives, by nearly one-half to GBP832 million total, without giving individual figures.
So far this year, Diamond's peers at part-government-owned U.K banks Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC have given up bonuses in the face of political pressure. However, Barclays never took direct state aid in the crisis and the U.K government accordingly cannot force its management to curb pay.
Still, Diamond said it was important to "remain sensitive" to the public perception of banker pay. "We need to be responsive to the public mood," he said.
Barclays' results come as its competitors reported limp 2011 fourth-quarter earnings, dragged down in part by the poor performance of their investment banks. Credit Suisse Group AG reported an unexpected loss for the fourth quarter on Thursday and said it would slash its dividend and cut bonuses, as it booked a large charge for winding down risky assets and exiting certain investment banking businesses. UBS AG, said Tuesday that net profit dropped 76% in the fourth quarter and the bank, Switzerland's largest, offered a gloomy outlook for the start of this year.
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