Barclays profit tops $18 billion, says reins in bonuses

LONDON (Reuters) - BARCLAYS (BARC.LO) said it had started the year well after beating forecasts with 2009 profit of 11.6 billion pounds ($18.2 billion), adding it had reined in payouts for staff after a public backlash over banker pay.

Britain's second-largest bank by market value, which did not receive taxpayer help during the crisis, said its investment bankers would receive average pay of 191,000 pounds for 2009, including an average bonus of 95,000 pounds, amid intense pressure to reduce awards.

With a compensation ratio of 38 percent for its investment banking arm, down from 44 percent, Barclays is broadly in line with peers; just above Wall Street giant Goldman Sachs but below European rival Deutsche Bank's 40 percent.

"The bond of trust between banks and stakeholders has been damaged by the credit crunch and the economic recession. That bond must be restored to health by how banks behave -- how we lend, and how we pay," said Chief Executive John Varley.

Shares in the bank, the first British lender to report earnings, jumped over 7 percent on the bumper profit, swelled by a 6.3 billion pound gain on the sale of its Barclays Global Investors (BGI) asset management arm.

Barclays ranks as the top earning European bank for last year, with profits up 92 percent from 6.1 billion pounds in 2008 and beating the average forecast of 11.2 billion from a Thomson Reuters I/B/E/S poll of 20 analysts.

Underlying profit, stripping out the BGI gain, was 5.6 billion pounds, up from 1.6 billion in 2008.

Earnings at Barclays Capital, the investment bank arm headed by Bob Diamond, jumped 89 percent on the year to 2.5 billion pounds, thanks to its purchase of the U.S. operations of Lehman Brothers, expansion in Europe and Asia, and a revival in capital markets.

Unlike many of its rivals, BarCap said its October to December income was virtually flat on the previous quarter.

"They have surprised positively in revenues, particularly in investment banking," said Arturo de Frias, analyst at Evolution.

"The stock was trading at such low prices because of capital concerns, liquidity concerns, earnings concerns. I think these results are proof they can do much better than what the market expects," he added.

CEO Varley has steered the bank through the crisis without need for a direct taxpayer bailout and said pretax profit so far this year was "well ahead" of the run rates for the first half of 2009 and the full year.

Analysts said last year's bad debts of 8.1 billion pounds were well below expectations of near 9 billion pounds, and the bank said it expected a moderate decline this year.

At around 0940 GMT its shares were up 7.2 percent at 295p, outperforming a 1.2 percent rise in the FTSE index.

BONUS BACKLASH

Barclays, which along with industry rivals has come under scrutiny over bonus payouts, said it would pay 1.5 billion pounds in discretionary cash payments for 2009 and a further 1.2 billion pounds of long-term awards that vest over three years and can be clawed back.

BarCap said its ratio of compensation to revenue -- a key industry measure -- came down to 38 percent and Diamond, who gave up his own cash bonus, said he expected the ratio to remain near that level in future years.

Barclays said its board considered its performance last year merited bonuses for top executives, but Varley and Diamond had opted to decline any cash awards for a second successive year.

Bonuses for other executive board members and all members of BarCap's executive committee will be awarded over three years.

The bank will pay 225 million pounds to the British government under a 50 percent tax on bonuses of over 25,000 pounds. Varley said the bonus pool had been reduced to cover the cost of the tax, and would be shared by staff globally.

The bank's core Tier 1 ratio, a key measure of capital strength and a focus of many analysts' concerns, rose to 10 percent at the end of 2009 from 5.6 percent a year earlier, above forecasts.

"We have strengthened our financial position considerably over the year in the areas of capital, liquidity and leverage and are well positioned to manage further changes that may be required of us by our regulators," Varley said.

Barclays cheered investors with indications its dividend in 2010 could be more than its annualized 4.5 pence for 2009.

For a graphic on Barclays shares and profits, click on:

http://graphics.thomsonreuters.com/0210/UK_BARC0210.gif

(Editing by Simon Jessop)

($1 = 0.6381 pound)

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