Barclays Plans 25% to 30% Pay Cut for Bankers

By Jeffrey McCracken, Serena Saitto and Howard Mustoe - Feb 3, 2012 1:10 AM GMT+0700

Barclays Plc (BARC), the British lender run by Robert Diamond, plans to cut compensation for the 24,000 employees at its investment banking unit by as much as 30 percent, two people with knowledge of the talks said.

The lender is preparing to tell employees at Barclays Capital next week that overall pay will be down by 25 percent to 30 percent on average from a year earlier, said the people, who declined to be identified because the plans haven’t yet been made public. The bank will also eliminate about 5 percent of its senior bankers, said the people. Those at risk typically hold titles such as executive directors and managing directors.

The world’s biggest lenders are curbing pay as they grapple with declining revenue. Morgan Stanley, Credit Suisse Group AG and Citigroup Inc. (C) have all reduced senior investment bankers’ pay for last year as revenue slows. Deutsche Bank AG (DBK), Germany’s largest, today said it reduced compensation for employees at its corporate and investment bank by 15 percent.

Barclays also plans to cut remuneration for more junior employees such as vice presidents, associates and analysts, the people said. The London-based bank plans to reduce pay for third-year vice presidents, which can be as much as $750,000 a year, by about $100,000, the people said.

The reduction will trigger similar pay cuts for more junior vice presidents, associates and analysts, the people said. In past years, base pay for junior bankers, who typically comprise three-fourths of a Wall Street firm’s employees, would rise by 15 percent to 20 percent annually, even in lean years, the people said.

Shrinking Earnings

Kerrie-Ann Cohen, a Barclays Capital spokeswoman in New York, declined to comment on compensation and firings. The stock, which fell 33 percent in 2011, rose 1.7 percent to 227.9 pence in London today, for a market value of 27.8 billion pounds ($44 billion).

Barclays reports full-year earnings on Feb. 10. Net income for the full year may fall 12 percent to 3.14 billion pounds from 3.56 billion pounds, according to the median estimate of 11 analysts surveyed by Bloomberg.

Investment banking revenue fell 12 percent to 2.25 billion pounds in the third quarter, the lender said in October. The lender said at the time it had eliminated 3,500 jobs in 2011.

Banks, insurers and asset managers in Britain may eliminate 11,000 jobs in the first three months of this year after cutting 9,000 jobs in the fourth quarter, according to estimates by the Confederation of British Industry, Britain’s biggest business lobby group. Financial firms in Britain may have shed almost a tenth of their employees by the end of the first quarter since Lehman Brothers Holdings Inc.’s collapse, the CBI said.

Royal Bank of Scotland Group Plc, Britain’s biggest government-owned bank, said last month it will cut about 4,800 jobs, including 3,500 at its investment bank over the next three years, as the Edinburgh-based lender jettisons unprofitable cash equities and merger-advisory operations.

To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net;

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; Edward Evans at eevans3@bloomberg.net