BARCLAYS is expected to rely on its investment banking division, Barclays Capital, for over 70 per cent of its pre-tax profits when it reports its full-year results tomorrow.
Analysts are anticipating a loss at the bank’s corporate division, meaning that despite a difficult year for investment banks, BarCap will bring in the vast majority of the group’s earnings.
Bonuses are expected to fall, although the overall compensation ratio of pay to revenues could go up, partly as a result of accounting rules governing deferred pay.
Despite a likely drop in bonuses, the bank will have to face down controversy over the pay of its chief executive Bob Diamond, who is due for a bonus of up to £9m in shares. Even under pressure, the bank could decide not to reveal his award until the release of the bank’s formal full-year report in several weeks.
With Diamond presenting the results for the first time as chief executive tomorrow, his old division, BarCap, is expected to report pre-tax profit of £4.3bn for 2010, versus £5.7bn for the group overall. This would compare to group pre-tax profits of £4.59bn last year, of which £2.46bn came from BarCap.
Diamond is expected to announce a cost-cutting initiative across the whole group, extending the job cuts currently being implemented at BarCap.
And in reponse to concerns about the bank’s capital buffer, he could also announce that he is tying bonuses to its capital ratio using a form of contingent convertible bond that would be triggered if its capital falls too low.
Some analysts claim the bank will struggle to keep its core tier one capital ratio at 10 per cent.
Evolution Securities’ Arturo de Frias claims that the bank would need to raise £5bn in order to stay above the 10 per cent mark.