Barclays Warns Half of Bankers Are at Risk of Pay CutsBy
Investment bank CEO wants more differentiation in compensation
Throsby joined in January to turn around worst-performing unit
Barclays Plc’s top investment banker has told staff he’ll sharpen divisions in bonuses this year, boosting pay for top performers while cutting it for those in the bottom half, people familiar with the comments said.
Tim Throsby, recruited from JPMorgan Chase & Co. in January to turn around the faltering trading division, said those consistently ranked in the lower half should expect to see their compensation shrink, while those in the top quartile will see it grow, according to people briefed on the remarks. The comments were made at a townhall for European staff this month.
Barclays must apply a greater degree of differentiation in pay, he repeated multiple times, responding to a question from the audience, the people said. A Barclays spokeswoman declined to comment on the remarks.
The stronger stance comes as Chief Executive Officer Jes Staley and Throsby encourage the investment bank to take more risks and recapture market share after years of retrenchment and dwindling profitability. Throsby has pledged to reignite “commercial zeal” within the business and has recruited numerous and costly, high-profile hedge-fund traders to drive his ambitions.
Staley and Throsby are under pressure from shareholders to show results soon, with the shares having fallen the most of any major European or Wall Street bank this year. Last month, Barclays plunged the most since the aftermath of the Brexit vote after its traders posted the worst performance in the CEO’s two-year tenure.
Throsby’s comments echo those of other European bank executives, who have started managing expectations for pay this year. On Tuesday, Credit Suisse Group AG CEO Tidjane Thiam said staff should not expect "spectacular" pay rises as the Swiss bank emerges from two years of restructuring, but that rewards will be "fair" for those that perform.
HSBC Holdings Plc also said at the start of the year it planned to widen divisions in its bonus pool to foster more competition and reward its highest revenue earners. However, the executive responsible for that drive, Matthew Westerman, stepped down this month after his brash management style clashed with the more collegiate culture at HSBC.
Barclays’s senior managers have been briefed that this year’s bonus round will be "tough" because the pool is set to shrink after pretax profit fell 7 percent at the corporate and investment bank in the first nine months of 2017, two of the people said. No final decision has been made on the size of the pot, they said.
Last year, Barclays reduced the bonus pool for “front-office” investment bank employees by 1 percent, with the larger true decline masked by a post-Brexit drop in the value of the pound that made paying New York-based employees more expensive. The firm also increased the portion of the rewards it pays up-front.
"You want to be able to move your costs in relation to what revenues are doing -- if in the future revenues are weak, we want to be able to reduce our pool and you’ll see it in our accounting numbers” the same year, Staley said in February, when asked why the deferral changes had been made.
— With assistance by Gavin Finch