D-Day for Diamond

BARCLAYS boss Bob Diamond will be hoping that he has managed to head off a major shareholder rebellion today by unveiling a bumper set of first-quarter results.

The bank has been preparing for 10 to 15 per cent of its investors to vote against its remuneration package in today’s shareholder meeting, although there were suggestions yesterday that it could be as high as a third.

A very large protest will put the spotlight on Barclays’ chairman Marcus Agius and Alison Carnworth, chair of the bank’s remuneration committee.

Agius will say he “recognises and accepts that remuneration levels across the industry have to adjust to the new reality of higher capital and lower returns for the sector. Evidently, we have not done a good enough job in articulating our case: on some matters we should have communicated earlier and more clearly...for this I apologise. I assure you that in future we will be engaging differently and more purposefully with shareholders to ensure we obtain a broader level of support on remuneration policy and practice.”

But Barclays is banking on some investors being mollified by the 22 per cent boost in pre-tax profits to £2.4bn announced yesterday – even though an extra £300m put aside to compensate customers mis-sold payment protection insurance (PPI) has absorbed most of the rise.

Its investment bank posted strong results even compared to rivals, which have all seen trading bounce back this year. Investment banking pre-tax profits fell only slightly compared to a record start to last year, and its $8.1bn in revenues was a three per cent rise on the same period of 2011. Return on equity for the quarter was 17 per cent, well above Diamond’s 13 per cent target – although the group figure was 12.2 per cent. The fixed income, commodities and currencies division drove the growth due to a surge in bond trading that brought revenues up nine per cent to £2.4bn, a figure Espirito Santo’s Andrew Lim called “stellar”.

The bank also reported a strong increase in the profitability of its UK high-street bank, where pre-tax earnings rose 16 per cent to £334m, and its African retail and business bank saw profits grow by a fifth to £177m.

Losses in its non-UK European business narrowed from £59m in the first quarter of last year to £43m. Unlike rivals, Barclays is seeing losses slow in Spain, though that is being offset by a deterioration in Portugal and Italy.

The bank could now revise down its estimate of impairment losses for the year from £3.8bn to £3.4bn. It attributed the move to fast action to absorb its Spanish write-downs in 2009-2010, unlike many EU banks that are now making extra provisions in Spain.
But like all bank chiefs who have reported results so far this year, Diamond warned that the environment is souring. The outlook “frankly continues to be challenging”, he said.