Barclays bosses shun bonuses despite soaring profits

Chief executive John Varley and president Bob Diamond are bidding to pacify clients and shareholders hit by recession after the "intense public interest and concern" over bank pay.

The move came as Barclays beat City expectations with a 92% jump in pre-tax profits to 11.6 billion, helped by the sale of its fund management arm and a bumper haul from investment banking business Barclays Capital.

In Mr Diamond's case, the rewards sacrificed are likely to run into tens of millions as the BarCap chief has a small basic salary but famously picked up a 22 million package in 2007.

Barclays chairman Marcus Agius also unveiled a wider pay overhaul across the group in order to help rebuild public trust in banks "significantly weakened by the events of the last three years".

All bonuses for other top directors will be paid in shares over a three-year period and subject to clawback, while pay principles from the Financial Services Authority (FSA) and G20 summit have also been implemented.

At BarCap, profits surged 89% in 2009 as the division was boosted by buying parts of the failed US bank Lehman Brothers, a lack of competition and fundraising by governments and companies across the world.

The proportion of revenues paid out in salary and bonuses fell from 44% to 38%, although the total pay and bonus pot was 4.5 billion – almost double the previous year.

Across the group as a whole, Barclays paid out 2.7 billion in bonuses – 1.5 billion in cash bonuses and 1.2 billion in long-term awards vesting over three years.

Of this, around 80% or 2.1 billion was paid out in bonuses to 23,000 investment bankers. The average compensation per employee in BarCap was 191,000.

Barclays is also paying 225 million to the Treasury as a result of the bonus tax introduced by Chancellor Alistair Darling at the end of last year.

This alone is almost half the predicted 550 million revenue forecast by Mr Darling when he announced the tax in December.

Mr Agius said it had lent an extra 35 billion during 2009 – far beyond its 11 billion pledge last April – to support the UK economy as it claws its way out of recession.

He said the bank would be judged by "how we lend and how we pay".

He added: "We know that the impact of the credit crunch and of the subsequent recession has made the lives of millions of citizens and thousands of businesses more difficult. We know that it's our obligation to provide support in ways that are responsible."

Shares in Barclays – which raised funds from the Middle East instead of taking taxpayer cash at the height of the financial crisis – jumped as much as 9% following the better-than-expected performance.

Richard Hunter, head of equities at stockbroker Hargreaves Lansdown, said: "In all, today's announcement reiterates Barclays' position as a major global force, whilst also setting the standard in kicking off the UK banking reporting season."

The bank's earnings were boosted by a 6.3 billion one-off gain from its sale of fund management arm Barclays Global Investors to US giant BlackRock, as well as a near-doubling of pre-tax profits at BarCap to 2.5 billion.

This more than offset other parts of the business hit by recession. Its UK retail banking arm, which has almost 1,700 branches across the country, saw profits fall by more than half to 612 million in the tough economic conditions.

Its UK commercial banking division also saw profits fall 41% due to rising defaults and falling asset values, while Barclaycard profits edged 4% lower to 761 million.

But across the group Barclays' bad debts were lower than expected at 8.1 billion, with impairment levels in the second half of the year 23% below the first six months of 2009.

The group is planning for a "moderate decline" in bad debt charges during 2010 with the exception of certain areas such as commercial lending, and

said it had enjoyed a "good start" to the year so far.