Some people at Barclays' investment bank may be very happy in their chinos and flip flops, but this is unlikely to outweigh their disappointment at Barclays' second half results, released this morning. Along with Deutsche Bank, Barclays hasn't done too well compared to peers. Worse: the decision to raise £5.8bn through a rights issue threatens to significantly reduce the bank's share price - and with it, the value of investment bankers' deferred bonuses.
Pay for Barclays' investment bankers has fallen and will fall further
Barclays used to be one of the better paying European investment banks. Not any more. Barclays still pays well, but its generosity is being dented by the falling pound and attempts to rein in pay.
In the first half of 2013, average compensation per head for investment bankers at Barclays was £100k ($153k), down from £104k last year.
During the same period, average compensation per head at Goldman Sachs reached $254k, up 12% on last year and 66% higher than at Barclays. In 2010, the discrepancy was 58%.
The pay gap is likely to widen further. While Goldman has emphasized the need to keep pay high in order to retain staff, Barclays has declared its determination to reduce the compensation ratio in its investment bank. In the first half of 2013, 39% of Barclays' revenues went to pay. By 2015, the bank wants to cut this to 35%.
Barclays' bankers' deferred bonuses are declining in value
The real issue for investment bankers at Barclays is, however, the bank's share price. Goldman's share price has increased 63% in the past year, Citigroup's has increased 90%. Barclays' shares have fallen 10% in the past week.
Barclays' shares fell 6% this morning following the news that Barclays plans to raise up to £5.8bn from shareholders and to increase its share base by 25%. The new shares are being offered at a discount of 40% to yesterday's closing price, and have the potential to reduce Barclays' share price still further.
It's bad news for Barclays' investment bankers, who received £446m of deferred share bonuses last year and £576m of deferred bonuses in 2011. The value of those bonuses is now declining fast - just as the value of deferred bonuses at U.S. banks is doing the exact opposite.
Revenues at Barclays' investment bank were poor compared to rivals
If declining relative pay isn't enough to put people off Barclays, the bank also performed poorly in the second quarter compared to U.S. rivals. As the chart below - taken from Barclays' second quarter presentation - shows, revenues in Barclays' key fixed income currencies and commodities (FICC) business fell 22% year-on-year in the second quarter.
By comparison, this chart - taken from a recent Goldman presentation on U.S. investment banks' results, shows that the average U.S. bank increased FICC revenues 13% year-on-year in the second quarter. And Barclays didn't just under-perform U.S. banks in FICC: equities and investment banking look comparatively poor too...
Source: Goldman Sachs
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