A short history of the bonus pool at Barclays’ investment bank

Barclays has yet to announce full year results for 2014. This is not inhibiting speculation about the depth of its bonus pool.

Citing an unnamed ‘insider’, the normally reliable Sky News reports that the overall bonus pool at Barclays will be £2bn this year, down from £2.4bn last year. If you work for Barclays, now may therefore be the moment to panic. Or not.

Bonuses at Barclays’ investment bank are on a long term downwards trajectory. In 2010, they averaged £105k. In 2012, they averaged £58k. In 2013, they rose by £2k – but only because Barclays claimed it needed to hike compensation to combat mass resignations in the U.S., where two thirds of one fixed income team were allegedly threatening to leave. Since then, however, Skip McGee, the former head of the U.S. business who was credited with driving bonuses up, has been dispensed with. Another hike seems unlikely.

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Source: eFinancialCareers research, Barclays’ reports 

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If Barclays investment banking bonuses fall in line with Sky’s figures for the overall bonus pool, the implication is that they will drop again – to £50k per person for 2014.

However, Barclays’ investment bankers have several reasons to think things won’t be so bad.

Firstly, Barclays is making redundancies. It’s in the process of cutting 7,000 people from its investment bank before 2016. Between May and September 2014 alone, 2,700 jobs disappeared. It’s entirely possible, therefore, that headcount at the investment bank has fallen by 15% over the past year, making a comparable cut in bonuses a virtual inevitability.

Secondly, Barclays has introduced some very generous role-based allowances to help compensate for any EU-mandated cuts to the bonus pool. In an investor call last October, the bank said it had already spent £150m on ‘role-based pay’ for 2014. Shared between the 1,340 Barclays ‘code staff’ affected by the EU bonus cap, this implies an average top-up payment of £111k per head in the first three quarters of the year alone.

And thirdly, Barclays is fairly adept at arguing that an increase in the bonus pool is actually a cut. In 2013, for example, the overall bonus pool at Barclays increased to £2.4bn, up from £2.2bn in 2012. However, the bank used its remuneration report to argue that this was actually an 18% drop on the ‘equivalent pre-risk and conduct event adjusted’ bonus pool for 2012.

A headline drop in Barclays’ bonus pool may therefore not be entirely what it seems. Barclays investment bankers have reason to think they will still get well paid regardless of the way it’s presented in the mainstream media.

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