It was a year of “steady progress”, said Barclays chief executive Antony Jenkins. Indeed, he regards it as so steadily progressive that he thinks it “appropriate” to accept the pay committee’s kind offer of a £1.1m bonus, taking his package for the year to £5.5m.
Most bank bosses, and most chief executives of large companies, would do exactly the same, make no mistake. Even so, this payout looks like a reward for completing only two laps of a four-lap race. Jenkins’ biggest task is to knock Barclays’ investment bank into shape and that job is only half-done – at best.
Return on equity in the division was a miserable 2.7%, way below the “across the cycle” target of 12%-plus. There are factors that may have depressed returns last year, like the accumulation of bonus liabilities from pre-reform days, but returns are still plainly inadequate.
Jenkins has cut costs, and displayed a slightly tougher approach to traders’ bonuses this year, but he has yet to prove that a viable investment bank will emerge eventually.
“I’m not a very patient person,” he declared, but shareholders have no choice in the matter: it will be 2016, almost a decade after the start of the financial crisis, before anyone can judge properly whether Barclays’ slimmer investment bank is capable of earning its keep.
Elsewhere, Barclays’ operating numbers are heading in the right direction and it would be churlish not to acknowledge the fact. The retail bank and Barclaycard look solid and overall capital ratios for the group have improved. At an “adjusted” level, pre-tax profits increased 12% to £5.5bn.
The trouble is, not all those “adjustments” can be wished away as accounting tweaks. In the space of a few months, the provision for suspected rigging of foreign exchange markets has gone from £500m to £1.25bn. If that becomes a real fine, it’s serious money. Indeed, it’s more than the current annual dividend bill of £1.1bn.
“Barclays today is a stronger business, with better prospects, than at any time since the financial crisis,” said Jenkins. Yes, that boast is probably fair given the improvement in the capital and leverage positions.
But the dividend remains stuck and statutory pre-tax profits have just fallen by a fifth to £2.2bn, underlining the harder truth of Jenkins’ admission that “we still have much work to do”.
A year ago, as banks reacted to the EU bonus cap by inventing “role based allowances”, Jenkins was given a £950,000 top-up to his £1.1m salary. Giving him £1.1m in addition as a bonus for 2014 feels like too much, too soon.
If you are a miner carrying almost $50bn of debt, you might think it is a waste of time in the current depressed pricing climate to talk about handing surplus cash to shareholders. Glencore’s Ivan Glasenberg is not the bashful type, however.
“Our ultimate goal remains to grow our free cash flow and return excess capital in the most sustainable and efficient manner,” he said on Tuesday.
The market agrees. Analysts at Jefferies expect a $1bn share buy-back to be announced later this year.
Well, okay, Glencore’s net debt is $30.5bn, not $49.7bn, if you include so-called “readily marketable inventories” deployed by the trading division. And, yes, the credit rating agencies are satisfied that Glencore’s debt is solid investment grade.
It is also true that the group’s trading division remains in fine form. Group net income was $4.3bn last year, a fall of only 7%, a smaller decline than all main rivals’.
Even so, whether debt is $30.5bn or $49.7bn, Glencore is more heavily leveraged than its peers. For comparison, the last debt figure for BHP Billiton, the world’s biggest miner, was $24.9bn.
Glasenberg needs no advice of how best to fund his company, but it should be glaringly obvious by now that a bid for Rio Tinto is a non-starter. That talk is now evaporating, rightly so.
If you missed HSBC chief executive Stuart Gulliver’s last appearance before a select committee, don’t worry, there’s a repeat next week. Gulliver, having told the Treasury committee how he received his bonus via a company in Panama (there was no tax advantage, note), can explain the details all over again to the public accounts committee on Monday.
This time he will be joined by Rona Fairhead, chair of the BBC Trust and former head of HSBC’s audit committee, and Chris Meares, former boss of the Swiss private bank. Jolly good – there’s still plenty to discuss about the Swiss revelations.
But where’s Lord Green? His absence is baffling. He is the person who can most usefully answer the question of how much senior directors knew, or could have been expected to know, about the Swiss operation. He was chief executive and then chairman of HSBC from 2003 to 2010, so was the top man in the relevant period, 2005-2007.
The public will be mystified as to why Green has not been called. Let’s hope committee chair Margaret Hodge spills the beans. Did she want to summon the Tory peer? If so, who stopped her?
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