Barclays halts directors' bonuses as profits fall

Barclays, Britain's third-largest lender, said that it would waive bonuses for its executive directors as it reported a 14 per cent fall in full-year pre-tax profits, announced £8.1 billion of writedowns and scrapped its dividend.

The bank reported a 2008 profit of £6.1 billion, ahead of analysts’ forecasts but down 14 per cent on the previous year.

Pre-tax profit fell from £7.1 billion in 2007 but ahead of an average forecast of £5.8 billion. The figures included a £2.2 billion gain that the bank made on its acquisition of a North American division of Lehman Brothers last year.

Barclays said that as a result of a “heavily negative” return on its shares in 2008 — its shares have fallen 76 per cent year on year — and the scrapping of its final dividend, “executive directors will receive no bonuses in 2008”.

However, is still paying about £600 million in bonuses below board level, which is nearly 50 per cent less than rewards paid in the previous year.

Barclays released its results as the dispute over bank bonuses continuted to rage.

Yesterday, Alistair Darling announced a review of how the British banking sector was run after an outcry over the level of bonuses that lenders, such as Royal Bank of Scotland, were proposing to pay after being bailed out by the taxpayer.

However, the review has drawn criticism because it is not scheduled to be concluded by the end of the year, while this morning, The Times revealed that the bankers who are managing the Government's £37 billion bailout of the banking sector will themselves receive bonuses.

Unlike RBS and Lloyds Banking Group, Barclays decided against taking government funds to boost its balance sheet, instead opting for funding from overseas investors.

This morning, Barclays revealed that its total staff costs had fallen 10 per cent on the year to £6.3 billion, with bonuses down 48 per cent, largely because of a lower level of performance-related payments at Barclays Capital and Barclays Global Investors, its two capital markets divisions.

The bank said that for this year and beyond it was reviewing its compensation policies and practices "to ensure that they evolve appropriately".

It will publish details in its forthcoming annual report. John Varley, chief executive, said that future performance payments were likely to contain a higher proportion of equity relative to cash and a greater element of deferred payments.

"I absolutely understand why this matter is the subject of scrutiny in the way that it is," Mr Varley said.

Barclays reaffirmed its intention to resume dividend payments in the second half of this year.

Its Tier 1 equity ratio, which is a key measure of a bank's financial health, was 6.7 per cent at the end of the year, up from 5.1 per cent a year earlier.

The shares rose nearly 10 per cent to 115.1p in early trading.