Its very easy to dislike Bob Diamond. I have never met him, and really I know very little about him. But if there’s on thing more unpopular than a banker, its a rich banker. Worse, an apparently arrogant rich banker. And even worse, he looks like getting another big bonus this year. If he is getting £9m or so that is rumoured that will make him one of the best paid bankers in the world. He says its time to stop wearing the hair-shirt and, though many won’t like it, he may well be right.
When he is presenting Barclays results I suspect he is going to show a graph that looks something like this:
Its Barclays profits after tax since 2002 (sourced from their accounts), but he’ll add 2010 which analysts currently reckon will be about £3.4bn. And it shows that Barclays didn’t make a loss in this period, despite the financial crisis. Even the investment bank, Barclays Capital, didn’t make a loss in 2008 and the company maintained a positive economic profit too. There were credit losses effectively going through the balance sheet in 2008 (mark-to-market) of £1.5bn, but they were more than offset by currency gains so there’s not even nasties hidden in the accounts.
There are some counter arguments to this rosy picture. An emergency fundraising of preference shares paying 14% does suggest some underlying difficulties. And while they weren’t bailed out directly by governments, there were significant indirect benefits. Had some of their counterparties that were bailed out gone under then its unlikely Barclays would have survived unscathed. So perhaps a period of hair-shirts was justified. But given Barclays performance its hard to disagree that the management, and Bob Diamond in particular (given BarCap is his baby), are justified in awarding themselves bonuses. When most other large investment banks were collapsing, Barclays pulled through. That deserves a reward. Whether he should get £9m though is another discussion…
PS If you want a contrast then we could pick on Lloyds. In 2007 Lloyds made about £3.3bn. Since then statutory profits have been £0.8bn (2008) & £1.0bn (2009.) The real situation is worse – 2009 saw a loss before tax of £6.3bn on the operating businesses saved (mostly) by an £11bn ‘negative goodwill credit’. Basically HBOS was a disastrous purchase financially and so far the best shareholders can say is that HBOS shareholders and the government shareholding have diluted their losses. Yet, the executive board shared over £4m in performance pay in 2009. Even back on the old run rate it would be 2 years to regain the 2009 losses. In reality its likely to be longer with 40+% effectively belonging to the government. The board should take responsibility for its decisions and, if they aren’t replaced, take nothing until shareholders have a company worth something like the one they started with. Barclays know where to send their hair-shirts!!