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.
We still
have much work to do
Antony
Jenkins
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”.
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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.
Glencore
leverage
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.
Missing
peer
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?
source: theguardian
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