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Are Barclays' profits irrelevant?

Robert Peston | 07:05 UK time, Monday, 9 February 2009

Although Barclays' share price has recovered a good deal in the past few days, the bank's value has still plunged more than 80% over the past year.

And its market value as of Friday night was £8.8bn - which is just a bit more than the £6.1bn that the bank has just announced as its statutory pre-tax profit for 2008.

Barclays Bank headquarters in Canary Wharf 23/04/2007 Matt Cardy/Getty ImagesIn other words, investors are valuing Barclays at a little bit more than the value of a single year's profit.

What does this mean?

Well, it implies a couple of troubling things.

First, it shouts that investors believe that the prospects for Barclays are pretty dire - that they regard the £6.1bn of profit as an interesting historical factoid of little relevance to the future earning power of this bank (or perhaps any bank).

The City is basically saying that the profitability of banks such as Barclays has been squeezed in a semi-permanent way.

Second, the low share price rather reinforces the notion that the accounting rules for banks aren't really capturing the economic reality.

Even if you take the view that investors are being too pessimistic about what lurks around the corner for Barclays, there is something rather extraordinary about Barclays declaring a profit on this scale - and adding more than £5bn of retained earnings to reserves - and yet being deemed by the Financial Services Authority to have needed to raise more than £10bn in new capital.

It is of course clear that the City watchdog and other regulators allowed banks - perhaps negligently - to grow and grow on the basis of weak foundations, with too little capital underpinning them.

But there is nonetheless a terrible inconsistency between Barclays' apparent financial success and the verdict of the FSA that it was dangerously short of capital.

All of this just adds to a general sense of anxiety that the official way of painting what's going on at a bank - through the annual audited figures - doesn't capture the reality.

Which is not a trivial issue. Because the markets that underpin the workings of our economy won't function again properly unless and until we have a strong sense of what's happening inside our banks.

UPDATE 0905:
Barclays' 14% fall in profits looks like a triumph compared with the huge losses suffered by its big rivals, Royal Bank of Scotland and HBOS.

But all is not quite what it seems, because Barclays' performance has been flattered by some one-off and unusual gains on deals.

That said, investors liked what they saw and the Barclays share price has risen.

And what about the heated issue of the moment, bonuses?

Well, John Varley, Barclays chief executive, told me that what he calls the variable element of pay at his bank has fallen by almost 50%.

And he concedes that some bankers' pay was - for a period - excessive.

But the Chancellor is saying he will have the right to stick his nose into how Barclays rewards its staff, because the bank wants to participate in the scheme by which taxpayers will insure banks against losses on their more foolish loans and investments.

So it's moot whether Barclays' remuneration practices will silence critics of the City's big-bonus culture - especially since Vince Cable, the Liberal Democrats' scourge of the banks, is trying to shine a bright light on Barclays' highly profitable business that helps companies reduce their tax bills.

SECOND UPDATE 1000: I am trying to assess the significance of the astonishing increase in the value of Barclays' reported assets and liabilities, from £1,227bn to £2,053bn.

Barclays' gross assets and liabilities are now significantly greater than the annual output of the British economy.

At a time when banks are supposed to be shrinking their leverage for all our sakes - especially their exposure to other financial institutions - this is not wholly reassuring.

Part of that growth in the balance sheet stems from the impact of the fall in sterling on foreign-currency assets and liabilities. And part stems from an increase in loans and advances of £124bn (which isn't trivial).

But the biggest increment was "£737bn attributable to an increase in derivative assets", according to Barclays' finance director, Chris Lucas.

That sounds worrying. But he insists that the derivative exposure would be £917bn lower if the accounting rules allowed the bank to show the net position with individual customers or counterparties.

What Barclays is saying is that - in effect - it has lent £917bn to a bunch of institutions but has also borrowed £917bn in matching quantities from the identical bunch of institutions, so the net exposure is nil.

But that's only reassuring up to a point - because what the net position obscures is all sorts of niceties such as the differing maturities of the reciprocal claims with the counterparties and also the rights of Barclays and the counterparties in the unlikely event that one of them were to go bust.

Broadly, if you want to be anxious about the prospects for Barclays you would say that its balance sheet is becoming even more complex and substantial, when the painful lesson of recent history would be that fortune favours smaller banks engaged in simpler transactions.

Comments

Page 1 of 3

  • Comment number 1.

    So how should the "painting of what's going on at a bank" be done differently?

  • Comment number 2.

    Robert,

    "But there is nonetheless a terrible inconsistency between Barclays' apparent financial success and the verdict of the FSA that it was dangerously short of capital."

    I think you might be mistaken here.

    The FSA checked the books when Barclays didn't take the govenment up on it's offer of tax-payers cash, and the FSA agreed that they didn't need the money.

    The only reason why Barclays had to raise more captial was because of the change in the rules around the capital ratios, which applied to ALL banks.

  • Comment number 3.

    This has been and continues to be about confidence. Confidence in our financial institutions and in our government to 'do the right thing'. The banks have turned the corner with suvstantial assistance from the state but the statements from PM and monsters noting their anger at the banking culture must worry investers about the regulatory future of all UK banks.

    What we need is less spin and more concrete, considered action.

  • Comment number 4.

    Well Robert all credit to Barclays, but it certainly casts a long shadow over the other banks and their remuneration policies. The government must still act to regulate the sector. They must stop talking and do something. The bonus for nothing culture must end, and an 'independent' report that will report in the distant future is simply a stalling tactic.

  • Comment number 5.

    Robert

    Good morning. To qoute you, if:

    "the accounting rules for banks aren't really capturing the economic reality",

    apart putting Barclays' Auditors and Accountants under scrutiny,

    although Barclays has cash in the bank, due to the FSA requirements,

    by implication, from what you are not saying Barclays is,

    "busted and ultimately, doomed".

  • Comment number 6.

    Through recent bleak and dismal times I've foolishly come to believe that the initials RP are owned by Robert Peston.

    Now my light has come shining and the opressive clouds have lifted to reveal the true meaning of the initials RP:

    Radio Paradise!

    Tune in; Turn on; Drop the burden.

  • Comment number 7.

    WHAT "profits"? If Barclays has to participate in any aspect of the taxpayer-funded bailout, irrespective of whether it is termed "insurance", how can it be "profitable"? If it has just made 6 billion, why does it need out money?

    "Profits" will be used to justify "bonuses". Meanwhile, the same group of people who were desperated to buy ABN for over 60 billion are still in place. Had it not been for Goodwin at RBS, Barclays would be, by now, a complete basket-case.

    Varley and crew are still there, only by default. Their judgement is demonstably flawed; any figures they produce are manicured; and anyone who takes them seriously is too easily duped.

  • Comment number 8.

    Robert;

    It would help the discussion and your analysis if one had access to the calculations carried out by the FSA, in other words what steps did they take in coming to the determination that Barclays needed large scale financing?

    Your comments, althought no doubt well informed, seem to stem from the fact that Barclay's accountants follow a different process that followed by the FSA, but what DID the FSA do?

    What did they look at to reach the conclusions they did? was it the same for all the banks that were bailed out? are these available to the public?

    If the FSA reach their conclusions by following some "secret" analysis using private data, then how can that be used to inspire confidence or reduce it?

  • Comment number 9.

    Don't have a go at Robert. He's just peddling the official BBC editorial line that we are all doomed.

  • Comment number 10.

    Isn't it the case that none of the banks can tell anyone what their assets are, or how much toxic debt) value they have?

    So inconsistencies are boud to appear.


    The BBC transmitted an excellent Panorama last week. I think I'll watch that again today after another snowball fight.

    What are Panorama doing tonight, I wonder?

  • Comment number 11.

    Looks a bit like sour grapes because there will be no opportunity to nationalse Barclays. I jut wish I had bought their shares 3 weeeks ago.

  • Comment number 12.

    It isn't just the bonus culture that is wrong. I have the impresssion that, at last, the government has accepted this. Yvette Cooper, speaking on the today programme just now, said that the whole remuneration should be looked at.

    For years, financial institutions have paid far too much, and have distorted the pay in other sectors. It is nonsense to suggest that the "brightest and best" are needed by the banks. They are needed by medicine, law, engineering, science, education, transport, etc.

    Greed has been the driver of some young people into finance. hopefully there are able students now who can be recruited from university into ethical banking.
    The government may well be hamstrung by existing contractual agreements that banks have set up. However, there is no legal compulsion on our governement (and the tax-payer) to give guarantees of support to the banks. I suggest that all banks are told that the maximum remuneration for anyone with a fulltime job in a bank must be less that £300k. This monstrous figure is way above what people in most other sectors can earn. Any bank that pays more than this after (say) 1st March 2009 would have the tax-payers guarantee of 50k for savers withdrawn. Then banks wouldn't dare to behave immorally.

    I think the government is being feeble by not realising the power that it has.

  • Comment number 13.

    This government must understand that the British public will not accept half-baked attempts to 'pretend 'they are doing something about the bonus and pay culture. They will lose the next election and if they have any dignity left they'll recognise that they owe the British people an orderly and 'moral' retreat from the political scene. They can only do this by recognising public outrage over the issue of bank pay and bonuses and act decisively.

  • Comment number 14.

    Two things are happening here:

    Fear

    and

    Distrust

    Investors fear shortselling, and they fear the effects of the Depression on UK business.

    Investors distrust the Boards of the Banks, who have proven to be dishonest, putting themselves before the Shareholders in all ways.

    They also distrust the Gov't which has taken delight in destroying the investments of small shareholders and pension funds.

    No one with any sense will touch any UK Shares (unless they really know the company)

  • Comment number 15.

    Dear Robert
    No they are not, It show that Banks are making Massive Profits even in a down turn, and that ey have created this profit by not lending.
    It also shows that Barclays are subsidised by Middle East Bankers, and that those Banks Now in Stae Control, Have issues with Top Management who ARE STILL in control and will recieve Massive Bonus's for failure.ShareHolders should stop thses payments by a shareholders revolt, and this is Crass incompetanve By the Governemnet who should stop these payments without delay.
    Problem is Gordon BOWN AND DARLING HAVE NOT GOT THE BOTTLE TO DO THIS.For fear of upsetting the City,
    "What about the tax payer who is funding this then"?

  • Comment number 16.

    monthly reporting of accounts is possible nowadays instead of annual reporting by running the same computer programs at the end of each month instead of at the end of the year.

  • Comment number 17.

    Sadly both the Gov't and Opposition remain wedded to the failed economic and political orthodoxy of globalisation, and free marketeering, (should that be free market Profiteering ?).

    Whilst they refuse to address these issues the British economy will continue its inexorable slide downwards.

    I think I might make a Snowman this afternoon.

  • Comment number 18.

    What is going on at the banks? In an American context, how does $750 billion in subprime loans become trillions of dollars in liabilities?

    Even if we were to assume a 100% default rate on the subprime loans and that they became worthless that only produces $750 billion in problem.

    Yes there is a series of interlinking transactions involving the transfer of risk from one company to another. But the net result of this transfer is $750 billion.

    After the $750 billion is allowed for the rest is a zero sum game. When you subtract the winners from the losers you should get zero. Why don't we get zero? Is it because the winners are not the banks? Winners do not go to the government for assistance, only losers do. But then why are the banks always on the losing side of these transfers? Were they so incompetent that they always took the losing side? What is going on?

    I understand that as the asset values drop the amount of collateral available to the banks drops as well and the definition of what is subprime drops. But there is still a big piece of this puzzle missing. It is time to follow the money. It is time to decompose these transactions to see who won and who lost and why.

    It is fine to talk about securitization and bundling of mortgages, but in the end a given set of securities must contain a given set of mortgages. It should be possible to see which ones have high to fall rates and which ones did not rather than tiring all of them with the same brush.

    We do not want to fall into the position of assuming the worst because we do not know. It is time to find out.

  • Comment number 19.

    16:

    The Accounts are meaningless if they have been sold unknown quantities of dodgy Bonds.

    The Directors and the Auditors do not know how much of the American Debt is toxic.

    America should repatriate all Bonds sold (misrepresented by the Ratings Agencies) dishonestly to European Banks (at the Bonds original face value).

    They should take responsibility for the actions of their financial institutions.

  • Comment number 20.

    #2 JadeWarrior

    With all due respect I wouldn't put my faith in what the FSA tells us.

    The British public has been let down tremendously by the FSA as has the SEC in the US. The only difference being that over in the US some of those in power will admit that their regulators fell down on the job in the good years. Here in the UK we cannot expect such honesty from our Govt.

  • Comment number 21.

    Barclays appears to have avoided an HMG takeover, and to have done well. This is obviously a big embarrassment to Gordon and his Scottish banks. You raise questions over Barclay's integrity, and you have thrived on close links to the Treasury. You have also missed an opportunity to illuminate some of the misunderstandings in this very complex situation. So my question is to what extent are you talking down Barclay's for your own or Gordon's political reasons?

  • Comment number 22.

    Bert - so the stock market rules then?

    give us peace

  • Comment number 23.

    I believe that Mr Varley, from Barclays, said in his Today interview this morning that executive members of the Board would not receive bonuses. What does this mean about non-executive Board members and the chairman? Their responsibility is equal with the executives. News bulletins have ignored the distinction between executives and non-executives.

  • Comment number 24.

    I think a great deal of circumspection is needed around the Barclays results and there needs to be a close look at the write-downs. Barclays was not only exposed to US sub-prime loans but to UK ones as well through its FirstPlus subsidiary. This was lending up to 125% of valuation (140% if the cost of PPI was included) at the peak of the property market. With a loan book of c £4bn there could be some large exposures there.

  • Comment number 25.

    its probobly a set of massaged figures, but on a wider point, jacqi smith, home secretary,ok claiming on her house in reddich whilst she stays with her sister in london, and claiming the full 116000 allowance.....does this not set out the wrong message! shes home secretary and should set an example, shes not breaking the rules ,but bending them a bit, this is the problem with all this bonus and bank stuff, they dont break the rules just bend them a little.We are such a greedy nation now money is king, its rotten to the core.

  • Comment number 26.


    If Barclays had made a £60 Billion pound profit the media would still be talking the bank down. And of course let’s not forget the scum of the earth - those short selling, gossip mongers, in the city who will be taking their profits today.

    The accounts have been audited and therefore I believe it is good news that Barclays have done well over the last year considering what else has been happening.

    Ban short selling for good and prosecute anyone who spreads rumours that unsettle the markets!

  • Comment number 27.

    Are Robert's comments irrelevant?

    Obviously they are. Robert is obviously out of his depth and continue commenting on things that he does not grasp.

    Robert when we will need comments about hysteria we give you a ring, in between maybe you could spend time to get the right information and understand a bit better what is going on?

    Thank you in advance.

  • Comment number 28.

    The problem, as I see it, is that investors have been burnt. Anyone who has purchased their shares in the last 2 yars has been slammed. What is really unknown and people are rightly nervous of is the true value of the assetts. People suspect that there are a lot more writeoffs to come. Until there is full, independently verified disclosure & bust banks allowed to fail, there will not be a way out. (despite the forthcoming dead cat bounce.)

    People are being realistic and do not believe the numbers.

  • Comment number 29.

    I quote from a Dutch europarliamentarian on the train this morning/
    "With one speech he rewrote the contracts of 200000 staff, over a paltry 18bn."
    Our contempt is not limited to this blog, I fear - and the economic incompetence is not limited to the Treasury either, as that is an average bonus of 90k per head, or 4 peoples' jobs per head, or close to a million unemployed when one takes into account the benefits involved.

  • Comment number 30.

    The City is saying that profitability has been squeezed in a semi-permanent way

    Perhaps Barclay's oh-so-lucrative 'tax schemes' business line won't prove worth all the effort to stay independent after all.

  • Comment number 31.

    The reason for the low valuation is staring you in the face - so obvious that you missed it.

    Banks have two parts.

    Part 1 is taking in money from savers and lending it to borrowers.
    Part 2 is betting on the stock market.

    Part 2 has of late been much more profitable than Part 1 but it is now set to be regulated out of existence.

    Hence much lower future profits and a lower share price.

  • Comment number 32.

    If Barclays share price is so out of line with fundamentals, it could split itself in two parts - "good Barclays" and "bad Barclays" the total value of which would surely exceed the current market cap. Here's how. Any private equity people out there want to buy Barclays and make this happen?

    http://www.knowingandmaking.com/2009/02/bad-barclays.html

  • Comment number 33.

    Oh come on Robert, give credit where credit's due !

    Barclays made £6bn last year

    Its strengthened its capital ratios

    Its paid over £900m in tax

    Its not had to take any UK government money and so hasn't been a burden on the UK taxpayer

    It will start paying dividends again in 2009 (good news for our pension funds)

    How many other British banks can say that ?

    Yes its taken a hit of £8bn in impairment etc but that was to be expected given the current economic environment.

    In the last recession Barclays made a loss, this time round it hasn't.

    I would agree with your point that there is a disconnect between Barclays performance and some of the FSA actions in recent months. But Barclays was only complying with FSA requirements to increase capital that were placed on all banks - good and bad. Maybe the FSA should have been more targeted in its approach ?

    To Zootmac (7)

    Re ABN Amro. Three differences between Barclays & the RBS bids:

    1. Barclays bid was significantly lower
    2. It was a majority share bid not all cash hence depleting reserves at the top of the market for RBS
    3. Barclays refused to top the RBS bid when Sir Fred's ego got the better of him and he saw red

    Outcome: Barclays is still in business making money and growing whereas RBS is a basket case being propped up by the government.

  • Comment number 34.

    I know nothing about banking but I watched Breakfast this morning and I couldn't believe the swing in optimism for Barclays by the guest panelist. I could have got my 8 year old to trot out what he came up with.

    There was a burning question on my mind. John Varley said this morning the profits included "significant one off gains", what were they and what would the profits have looked like without them?

  • Comment number 35.

    If a bank needs to borrow due to debt does that mean they inadvertently overspent or invested all their income and tax liabilities illegally to gain more profits.

    Is there a clear distinction between the banks money and stock and their clients which is held in custody on their behalf.

    Can losses be allocated retrospectively to advisory clients or in-house funds for bad investment decisions from off the book trading by banks.

    Should banks be excluded from investing or trading and be restricted to acting as investment vehicles for their clients funds only making profits from commissions, fees and interest from overnight deposits prior to settlement.

  • Comment number 36.

    Can somebody please explain these items in the Cash Flow...they seem be remarkably different from 2007 and 2008...What are these headings..
    Why are the so different from 2007 and 2008...what is barc doing to make them so different?

    Changes in operating assets and liabilities 24,518 (18,392)
    Net cash from operating activities 33,716 (10,747)
    Net cash from investing activities (8,755) 10,064
    Net cash from financing activities 12,272 3,358
    Effect of exchange rates on cash and cash equivalents (5,801) (550)

  • Comment number 37.

    This persistant whining on about banks is becoming extremely tedious
    HOW ABOUT REPORTING OTHER BUSINESS NEWS FOR A BALANCE.
    Perhaps that is beyond of your scope, no contacts.

  • Comment number 38.

    Dear Robert
    No matter how many words are written the issue is
    "YOU JUST CANNOT TRUST BANKERS"?
    or The Government," on issues that relate to Money.

  • Comment number 39.

    Thank you, Robert, for your insight. As I was reading your report, the discrepancy between the bank's good profit and the FSA's warning did jump out at me. So the problem is: two different accounting systems - banks and the FSA.
    JadeWarrior made a telling point: Barclays had to raise more capital because of the change in the rules around the capital ratios, which applied to all banks."
    In all, it seems that the problem lies in the rules, which includes the issues of transparency and bonuses
    So it is a political problem.
    A lot of bad things have been going on, with many cases, it would appear, being worse than bent rules. Can we rely on the FSA and SEC? Apparently not.
    I know that last year I have reported a Nasdaq company to the SEC, in detail, with no response.
    The colour of the political problem seems to me to one of corruption.

  • Comment number 40.

    Robert get real smell the coffee, Barclays have presented externally audited accounts which show a profit for the tax year in question, they reflect the value of assets on the last day of that accounting period.

    You fail to admit that you have had direct influence on the value of their assets, your blog and daily commentary are underming the confidence in the banks and now you seem to be questioning our system of accountancy. We're paying a high price for Hutton. What exactly are you looking to do create a new verb to "pestonate".

    The political reality is that we have had the government of choice, the Laboiur party which until Hutton was totally supported by the BBC. A labour party whose Chancellor began to believe he had discovered financial perpetual motion and overlooked the design of the control system. This is the definition of political expedience.

    The question I want you to answer is who is pestontaing who?

  • Comment number 41.

    Green Shoots - Greenspan used BDI as indicator of economic trends. It may be a mistake to use it this time. It would appear that current dramatic increase is due to reduced Ferric content in China's domestic Iron Ore Production, and a requirement for grain imports after a crop failure and not because of any great increase in economic activity. Similarly a collapse towards the end of the year may be due to a dramatic increase in supply from shipyards. My message is don't reply in BDI as a Green Shoot at present !

  • Comment number 42.

    Robert,

    your last two paragraphs have left us all hanging in the air.
    If the audited figures do not reflect reality, then what does? Or what would need to be changed to reflect reality?
    A follow up article would be very helpful.

  • Comment number 43.

    34 cap life

    The gains were on disposals and acquisitions against the previous value of the assets on the balance sheet - largely the acquisition of Lehmans North American business and the sale of the closed life company. Without them Barclays would still have made c3.5bn pounds profit last year

    A couple of additional points to my previous post:

    1. The regulatory regime for banks does need a thorough overhaul. Having 3 different UK bodies involved is just confusing for everyone and has obviously not worked given the problems in the industry at large. Clear regulatory accountability and clarity is required - the buck must stop at one regulator's door.

    2. These results would have undergone thorough regulatory and auditor scrutiny to ensure full disclosure and compliance with all current laws and regulations. We should also remember that Barclays Directors carry certain liabilities themselves regarding the numbers they publish and the public statements they make. No one is going to sign these accounts off unless they are comfortable they are fully compliant.

    3. We all know (or should do) that the market over values at the top and under values at the bottom - its not a perfect market. Share price rise this morning would tend to confirm this


  • Comment number 44.

    What on earth does a declared profit/loss have to do with the true finances of a company? They are "massaged" to provide whatever message the directors wish to convey. This involves a balance between large profit (to look good to attract investment) and small profit/losses (to hide money to pay fat bonuses).

    Related topic: As some readers may be aware I am not one of the "I hate Brown" crowd but the current situation with banks will nail Gordon Browns coffin. He has two choices:

    1. Nail the banks, no bonuses, no excuses.
    2. Anything else!!!!!!!!!

    The voting public will not forget this episode. I am already hearing the government coming out with lame excuses "there may be contractual obligations to pay bonuses".

    Try this : "We (the government) have suspended all bonuses in all companies currently receiving financial aid until ALL contracts have been independantly reviewed. Any bonus linked to profit no matter how tenous will not be paid".

    Or try this: "We (the government) as majority shareholders are calling an extraordinary general meeting and we will be voting out and replacing EVERYBODY!"

    The calling cry that "we will lose experience" is so so shallow I'm astonished anyone has the audacity these days to keep bleating on about it.

  • Comment number 45.

    #18
    It's because nobody knows who bought what, and it's starting to come unravelled. You own some repackaged mortgages, and are faced with a loss? Your insurance company wants to know what that loss is for, and to take possession of the assets. It's turning out that this isn't feasible, that package is the minced remnants of other packages as mortgages were paid off, and so on and so forth. So the Insurer won't pay out, and a portfolio is worth whatever the issuer says it is worth, and if the issuer's staff have gone, then it means diddly squat.
    This is simply another instance of the mass insanity of crowds, typified by the South Sea Bubble, and more specifically the infamous Articles of a company incorporated in 1720 as "a company for carrying out an undertaking of great advantage, but nobody to know what it is".
    And in such an environment, and with a tradiition of questionable portfolio valuation such as Barclays has, is it any wonder that their market valuation is last year's profits?
    And of course the inverse argument to RP's applies, that this company entered into the year's trading with a true net value of approximately zero, regardless of what its earlier reports stated, and on that basis, if past reports aren't worth the paper they're written on, do we have any reason to have any greater faith in this one? That's why the safety net is there, because far from being masters of the universe, they're not even masters of their own portfolio. It may be justified in a market as uncertain as this one, were it not for the fact that the mess is very much of their own making.

  • Comment number 46.

    will the cash injections be monitored or are we just hoping everything will come out in the wash clean again

  • Comment number 47.

    Why are'nt Varley and Bob Diamond buying BARC shares yet?
    Bob Diamond has sold 4 million pounds worth of shares at 438p each one year ago. Why is'nt he buying now if he thinks his business is sound?

  • Comment number 48.

    We need to remember that all through time many a profitable business has gone bust whilst still making huge audited profits.

    Over £2 billion of Barclays announced profits are due to the experts valuing the part of Lehmans Barclays bought, at £2 million higher than Barclays paid - well thats what got us all in this fine mess.

    You do have to put a figure on it for sure otherwise when things turn shareholders are ripped off the other way round. But in deflationary times look to the flows of real money.

    Its cash flow that counts, real cash not paper profits.

    This is why the excessive bonus culture came around, its based on paper profits, not earnings of hard cash.

    There is a case of the market having to produce two p/l accounts, one of pure cash and one of capital gains profits, I know all the accountants out there will say the information is there if you look, but we need to headline these together (so journalists need training too) as it would then be more transparent to the non accountant public.

  • Comment number 49.


    It would help if the banks were more honest about how they are performing. On the Today programme this morning John Varley made much of profitable banks compared to loss makers and those with government money. However when he kept referring to Barclay's own performance he did not adjust for the fact that shareholders have been significantly diluted by Barclays capital raising process and the owners who enjoyed all of last year's profits only benefit from part of this year's - in other words performance in terms of shareholder return is much worse than Mr Varley suggested.

  • Comment number 50.

    "the accounting rules for banks aren't really capturing the economic reality.".

    Are accountants and lawyers as responsible as the bankers for bring about the current global crisis?

    Complexity is very profitable and hides many holes.

  • Comment number 51.

    Bob Diamond did the following last year. Why is'nt he buying now?
    12-Mar Sell Robert E Diamond Jr 460.50p 506,600 £2,332,893.01
    04-Mar Sell Robert E Diamond Jr 453.80p 468,085 £2,124,169.78

  • Comment number 52.

    The man in the street just wants the banks to come clean-be whiter than white and afterall,if we ,the ordinary joes own/part own(laugh-that we will ever be given a divi personally) a fair few of them-why don't they issue regular trading updates once a month.Or have they something even worse to hide ?

    One other point-If Bradford&Bingley BS is not offering new mortgage products-then what is its future ?

    I don't feel particularly sorry for them-have had nothing but an unpleasant experience with the former mutual turned monster.

  • Comment number 53.

    Glad to see we have moved away from public opinion gathering - or have I missed something and you are being more subtle?

  • Comment number 54.

    In an average large bank, there are perhaps a couple of hundred people who make the fundamental decisions. Everyone else has their jobs defined by those decisions, and are set performance targets. Bonuses (banks hire staff on a pay + bonus package) are an incentive to exceed set targets, not 'for nothing' as a previous contributor asserts. The problem now is that public perception has lumped all bank workers together, and the feeling is that no bank worker should get a bonus, regardless of how their targets were set and how they performed. Perhaps it's the hard work of high street staff that has allowed Barclays to post profits for 2008, staff who, if the politicians have their way, will see no additional reward for their additional efforts. Why take short lunches, do unpaid overtime, take calls at weekends, answer email when on holiday when you're only paid to do 9 to 5?

    And don't forget that modest bonuses (forget the few people getting 6 and 7 figures) get spent. No bonuses means less spending on houses, holidays, furniture, cars, restaurants, clothes, white goods. No bonuses means more money sitting in the bank's reserves where it does nothing to actively help the economy.

  • Comment number 55.

    I fully expected a rant by RP about "excessive" bank profits following Barclays results in these grim economic times.

    As others have said he is a one trick pony. Its Banks,banks , banks Robert Ingenious Preston - (RIP) your role as BUSINESS editor at the BBC is being downgraded to that of just Pillory of the British banking industry.

    After all the gloom that has been rammed down our throats by the treasury spokespeson working for the BBC ... he should be celebrating a profitable success rather than looking for yet another angle to gain populus attention for questioning and criticism.

    I fully anticipate that the other conservative bank lloyds Tsb will report a profitable 2008 when they report in a few weeks time.

    As someone said earlier the only reason that Barclays and Lloyds needed additional capital was the overnight change in liquidity demands. It was not to rescue those banks or pay for the bonuses but to comply with that change of rules - the rest of the latter came through the rescuing of HBOS - it's a time you started looking at individual situations rather than generalistic global mud slinging to grab a public headline

  • Comment number 56.

    Robert,

    Time for another update perhaps

    I haven't read the statement yet, but Sharecast have reported that Barclays have

    'forecast a return to dividends "during the second half of 2009".'

    Could you ask Merv to switch my tax payments fundings out of RBS and into Barclays instead.

    Thanks

  • Comment number 57.

    having lost 30K whilst being reassured by bank's published information, my conclusion is to realise that there is no way that I as an outsider can ever trust an investment unless I have research into the fundamental operations of the business, and that is virtually impossible

  • Comment number 58.

    On the Today programme this morning Mr Varley of Barclays stated that none of the executive directors would receive a bonus for 2008.

    Big deal.

    Now, if he had said those same directors were going to pay back significant amounts of the remuneration they had received in previous years in recognition of the disastrous reversal of share price seen recently, he might have had my respect.

  • Comment number 59.

    Maybe off subject here but it just occured to me...

    I thought legal action could be taken against dirctors of companies if they were found 'Not to have acteded in the best interest of the company'.

    This was enhanced/brought in after the Maxwell scandal and to prevent directors well ripping off the company. If true and if the gov. is not inclined to bring these chaps to justice couldn't a private grouo do this of force some action?

    I'm sure all the money pumped into these banks would be used to protect these crooks (purely an opinion - allegedly) but just a thought.

  • Comment number 60.

    Unitended and perverse consequences are inherent in ALL bonus schemes.

  • Comment number 61.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 62.

    Ignore the criticis, Robert

    Your article highlighted a matter few are willing to acknowledge, "accounting practice".

    Barclays raised extra emergency funding via share issues and Gulf-state capital investments.

    If Barclays had not also made unsual gains from recent cheap purchase of Lehman assets and from other emergency divestments re:Barclays Capital and the bailouts from the US treasury, Barclays would be showing massive losses that would probably have dwarfed even RBS losses.

    Creative accounting practices put assets and liabilities on and off the balance sheets to suit the need to show either profits or more importantly, the level of losses. Clever use of government guarantees allows 'dodgy' assets to be realised at 'full' valu, thereby inflating profits.

    I cannot see how Barclays is fundamentally any more secure than any other bank because without its regulatory funding and foreign capital, it is basically BROKE.

  • Comment number 63.

    Perhaps what is more important is the news that Vattenfall - the Swedish Govt owned engineering group - is attempting to buy Scottish and Southern Energy.

    If this went through it would be the end of the UK electricity supply business.

  • Comment number 64.

    Please for once report the positive.

    You should give a balanced view as a BBC presenter.

    Barclays have come out with a bullish set of results with a real positive outlook for the future in some bad times.

    As far as Bonuses go Have you ever thought that these banks (bad or not) need the best professionals to produce these profits.
    To be paid well is no bad thing.

    As a share holder of Barclays their results and statments have made want invest more.
    Scare mongering the public does not help the long term view of this great country.

    There are some green shoots of recovery out there and it would be nice if you could report on them now and again.


  • Comment number 65.

    #16 - If only it were that easy! I think Quarterly Reporting is more likely (and that will be quite a challenge for most UK Banks)!

  • Comment number 66.

    Dear Robert,
    You are in the Know, " How many BRITISH MARKOFFS ARE THERE that the Government and the watch dogs are not telling us about.?"

  • Comment number 67.

    Are Barclays still the only major UK bank who do NOT mark to market?

    I think this would probably explain the apparent anomaly of their financial results.

  • Comment number 68.

    Robert has hinted at the potential problems when he says there was one off profits. I am guessing some of that profit may due to goodwill gained when it bought Lehman's US operations. Barclays also has exposure to the monoline insurers who if they come unstuck (not unreasonable) could force Barclays to value some of its assets lower. There is also the fact that Barclays value some US mortgage assets higher than recent sales of these assets have realised.

    Having said all that Barclays have managed to make money out of the part of Lehman's they bought. Barclays can reduce their exposure by utilising UK government insurance and guarantees instead of monoliners, and I think this has probably more to do with Barclays share recovery than anything else. On the value of assets then providing Barclays intends to hold then to maturity then it may not be that unreasonable to value them as they have.

    The big problem with all UK companies is that nobody really believes accountants are performing proper audits. Nobody believes government figures, or that the government rules and regulations are proper and fit. There is unlikely to be any recovery at Barclays or anywhere else until people begin to have faith in audited accounts, government statistics and banking rules. Quite simply there needs to be better monitoring and better separation from government. Nobody believes Gordon Brown made no contribution to the current problems and by denying it damage is done to not only the credibility of the Government but to all UK companies and individuals. Our eyes have been opened to greed, excesses and those who failed to curtail this. Perhaps the only consolation is that the US SEC and US government has proved even more uselessly equipped to deal with these problems.

  • Comment number 69.

    Another take on the share price:

    What the market is saying is that it disproves of the way in which all Banks make up their accounts - It simply does not trust the accounting standards in use.

    Under more normal circumstances 6 bn should relate to a market value of say 30-40 bn, but the reality is only 8 bn so the market is saying that either four fifths of the 6 bn is not real in some sense or it does not trust it - so 5 bn of dodgy-ness. Is this the markets view of Barclays not writing off some of its later un-resealable private equity deals for example? No-one will ever know. (And I suppose it may also be that the market is suggesting that the management of Barclays may not know itself!)

    Either way the share price should be a lot higher if the market trusted the figures.

  • Comment number 70.

    That's it Robert - tell it as it is - that's what I expect from my licence fee. I'm glad that some of it upsets the closet bankers and 'middlemen' who have got fat on created accounting and value. We need more of this until they're all smashed.

    Have not the banks have been practising their own form of 'QE without cash' for some time - creating value, hiding it within derivatives and trading this internationally 'off balance sheet' to fool the accountants, politicians and regulators (obviously not a difficult task) - this is what has got us into i.e exacerbated the current UK economic toxic bank syndrome crisis?

    Feeble accounting rules in need of massive over-haul

    Feeble tripartite goon show regulators and regulations.

    A sleaze museum made of two houses of sleaziment with fat cat politicians and peers taking bungs from wherever they can get them and hide them as fake political donations in order to keep their hands on power.

    Feeble, incompetent government scared of the banksters because of bung taking.
    Feeble egocentric banksters and bungsters running the banks.

    Feeble UK tax rules full of loopholes for non dom vultures and bad banks.

    The share price says it all - You can't buck the market!

  • Comment number 71.

    As an accountant I have to point out that accounts are expressions of opinion - not of fact. Particularly so in these troubled and unprecedented times.

    The big issue is how much the debts owed to Barclays - or any other bank- are actually worth. The answer is that it depends on unknown future events. In other words how many of the bank's customers will not be able to repay in full. (I am using customers in a broad sense here, not just to refer to holders of bank accounts with Barclays.)

    Barclays has taken an approach to valuing those debts and has disclosed that approach in its accounts. The approach has produced a value for the debts which has, as things have turned out, meant the bank's accounts show a profit.

    A different, and equally valid, approach might have produced a huge loss.

    Which result you regard as more realistic is a matter of opinion.

    We shall know, perhaps in 2 or 3 years from now, whether Barclays accounts this time were realistic.

    Ashill

  • Comment number 72.

    Robert and Fellow Bloggers

    I think that we must be careful not to be shrouded in the mists of the current drastic economic climate - much as many were in the false enthusiasm of the climate leading to the credit crunch.

    I beleive that whilst the actions and risks of many have created worldwide havoc there were many merits in the manner in which economic growth was fuled. I beleive the banks (not all of them) will come back strongly and then be allowed to introduce more practices which will allow them to grow a substantial and sustaainable profit growth leading to a return to their 2008 valuations.

    Lets not judge yet - lets support the Banking profession whilst damming the foolhardy and greedy practices of may allowed to work within it.

  • Comment number 73.

    I think 'magicblackfrog' raises a very important point, namely why all the focus on financial services businesses Robert?

    On the 1st anniversary of the passing of Sir John Harvey Jones, would it not be a positive step to start commenting in a broader ranges of business issues?

    There are several 'sectors' that comprise the business world, why not cover these more? What about software producers, software consultancies, eletronics, high-tech, manufacturing?

    Does Robert not think that in these time of belt-tightening he could cover the UK arms industry? if we are 'concerned' about 'public money' there are some real shockers in that area!

  • Comment number 74.

    The problem for Barclays is...does anyone believe them?
    Is it just "creative accounting"?
    Or is it.....Look, we've made 6 billion in profit providing we can dump 100 billion of toxic debt into the gov scheme.
    To me that equals a 94 billion pound loss.

  • Comment number 75.

    an accounting system is only proven to be 100% correct when everything ties up to the penny including random spot checks, back dated reconciliations and the achievement of a complete understanding

  • Comment number 76.

    Re #44

    Brown has a 3rd option, one which he should've exercised as the start of all this...

    3. Fall on your sword.

    The man simply has no honour. His blinkered view of the economy whilst Chancellor, whilst not solely to blame for the current downturn, was a contributory factor, and he should've walked (he wouldn't be pushed, after all he got his PM position gratis).

    I reiterate previous comments i've made, the government should do what they're supposed to - govern. Don't ask, instruct the banks re: bonuses.

    Want to help people? Get the 10% tax rate back in.

  • Comment number 77.

    Yes, RP.

    Irrelevant. No-one outside the clique of Barclays and its shareholders gives a four X about them.

    Irelevant - as your articles are increasingly becoming, except to whom I can only assume are dozens of bankers who write here.

    You really should talk to some BUSINESSMEN, BUSINESS editor. Because we're out in the breeze for sure.




    GC

    (#37- magicblackfrog wrote:
    "This persistent whining on about banks is becoming extremely tedious."
    Well said. The rest of us just soldier on as long as we can and the only 'help' is more 'credit' if we can get it, yeah? Like Worral T, yeah?)

  • Comment number 78.

    Robert, Thank you.

    That really was your best blog ever.

    For the first time, you hinted that the behaviour of the banks' Auditors and their statutory Accounts are behind the whole crunch and mess.

    We seem to have forgotten that the best Auditor in the world, Author Anderson, wiped itself out of existence with its dodgy and fraudulent practices.
    And we expect the other Big Four accountants, who rule the world, to be squeaky clean ?!?

    So Barclays have a set of accounts audited by one of the Big Four accountants. But don't those accounts say just what Barclays wants them to say, shows the profit Barclays wants them to show ? How much connection to reality do the Accounts have ???
    According to many, little or none (I can value my £1 lottery ticket at £500,000 if I want, because there is a case that I may win £5,000,000).




    ps. Seems you have had a few Barclays share price supporters making many comments in different guises above. Your blog space is a new financial propaganda battlefield ! Wow.

  • Comment number 79.

    The City is basically saying that the profitability of banks such as Barclays has been squeezed in a semi-permanent way.

    - The current share price does reflect the market view of Barclays, The recent profit of £6.1 billion is irrelevant. The market is saying at the moment we can't value Barclays.

    Current profit accounting has failed to factor in risk - although I am at a loss as to how accounting could factor it in unless Banks are forced to cover their risk i.e. hold very much higher ratios of capital.

    But the market is saying rightly future earnings will be vastly lower as bankers are shackled by regulation and a more risk averse environment.

    However what has amazed me is how august establishments like B&B, HBOS and dear old RBS have been so foot loose. But if accounting standards can't detect something like the Madoff Fund, something is surely desperately amiss?

    We need more regulation (not too much) but we more insight into banking operations to assess what we are investing in.

  • Comment number 80.

    #47 - Suspect one reason may be due to insider trading rules. As CEO of Barclays, it's reasonable to assume that he will know in advance of the markets what the FY financials are likely to look like so consequently, until this information is in the open, he is not allowed to trade in Barclays shares.

  • Comment number 81.

    If GB applied the same criteria to himself as he is to bankers and their bonuses (along with long-term Cabinet colleagues & senior Civil Servants) he should RESIGN TODAY - as his PM's salary and perks are unjustified based on his performance - whether he'd still have a back-bencher's wage next year would be a matter for his Scottish constituents.

  • Comment number 82.

    maybe there was a scam was to deliberately lose money for some rich players behind the scenes to become obscenely richer like spread betting gangster type syndicates allegedly do with football and horse racing, or was it just the usual plain incompetence on a mass scale by lemmings following the trend

  • Comment number 83.

    47. kallumama wrote:

    "Why are'nt Varley and Bob Diamond buying BARC shares yet?"

    He sort of has. The announcement that there will be no director bonuses from 2009 means that they will not get a lump of cash. Instead they will get stock options. If the directors have massive stock options set at the currency knock-down share price, then they do not have to buy the shares now. They can wait a few years and buy at today's low price and sell at a guaranteed profit.

    So long as Barclays do not go to the wall then they will make a killing on these options. The fact that they take stock options instead of cash bonuses means that they are confident that things will pick up.

    BTW, many other posters seem to think Barclays have taken government bailouts. They have not, so directors bonuses and pay is a matter for the shareholders only.

  • Comment number 84.

    In order to get the Banks lending, why doesn't the Government force them to give the poor hapless savers a decent return on their savings ? That way the banks will be forced to lend and to make surethat this time the ones who are loaned the money are in a postiton to repay them.

  • Comment number 85.

    truth is there is so much activity nobody knows what's going on

  • Comment number 86.

    When accounts are rushed out accuracy could be in question. Also auditors sign based on the information given to them. There is off shore financing this that and the other so its all questionable.

    Even profit on audited accounts can be different to profit shown to tax man as accounts are adjusted.

    I believe accounts should be published after one year so that there is time to do accounts accurately and auditors have time to audit it properly.

    Also auditors should be made responsible for what sign without having clauses that gets them out of it.

  • Comment number 87.

    #18 you have been misled by government spin aided and abetted by RP and other reporters. The failure of the 750billion dollar sub-prime and mortgaged backed securities was not the cause of the problem but merely the symptom of the bursting of a globalised asset price bubble that had been allowed to build up over the previous seven years. The root cause of this bubble was US and UK monetary and fiscal policies compounded by a failure to regulate both the banking sector and the derivative markets. Yes the banks made mistakes and many may be guilty of fraudulently mis-leading their share holders over the holes in their balance sheets but governments allowing the exponential expansion of debt and a failure to control the money supply was the cause of the bubble in the first place

  • Comment number 88.

    The more noise that the government makes about the payments made to bankers, the more obvious it becomes that they don't want to do anything about it. They have previously courted these people and now find themselves having to chastise them.
    This is so against the grain that it will not be done.
    From my own point of view I have no respect for these so called chiefs of Industry and commerce and I am never suprised by the ability of bullshit to baffle brains. The "con" is now fully exposed but we still can't quite believe that it's happened. Get real everyone as the emperor really does have no clothes on.
    regards
    Dave Hickman

  • Comment number 89.

    Our accounting system for our 5 companies is very simple-the balance sheet records assets and liabilities, the p and l shows the day to day position-ie-operating profitability.

    This system 'double accounts' so nothing can be hidden.

    This system is suitable for all sizes of business.

    Either the banks aren't using a similar system, are running 2 sets of accounts, or are using accountants who have well developed 'creative accounting' skills.

    We not only run month ends, but at anytime we can pull of a set of management accounts to monitor our financial 'health'.

    These accounts are simple and easy to read. I have even used them for doing the accounts for a charity.

    Ultimately, massaged figures are a waste of time and delude those reading them.

    Frankly, we have to take Barclays at face value at the moment-compare them with other banks with those from banks similar interests, and see what is so vastly different.

    Robert, you bash Barclays at every turn-why? You make no mention of HSBC, Santander, Coop etc etc.

    More balance please. Currently it doesn't look like Barclays have a problem. If you must target banking continuously, focus on those in serious trouble.

    Leave Barclays alone.

  • Comment number 90.

    Barclays Balance Sheet looks pretty good under the circumstances. They have more reserves than UK Ltd. Perhaps we could vote the Board to run the country and replace this dysfunctional Government?

  • Comment number 91.

    Once again Robert this bank together with their auditors are telling lies their provisons of 8b are understated by at least the same again and more likely 10b when are these obnoxious institutions going to be taught a real lesson.With regards the proposed RBS bonus payments these people are now civil servants send them out to deal with the raod gritting problem on second thoughts dont they would only spread the grit on roads that didnt need it,now if they have 1b to spare on bonuses this 1b should be lent now to small business

  • Comment number 92.

    From what I understand, Barclay's has 1.2 trillion in assets. Therefore if these assets were, say, to be revalued at 1% lower, they would have incurred a loss of 12 billion from the write-down, turning their 6 billion profit into a 6 billion loss.

    In the current climate how can any bank value it's assets to within a percent accuracy? The valuations are based on all sort of assumptions about future prices and exchange rates. So the numbers do not mean anything.

    The UK legal system appears to be incapable of dealing with possible mis-representation of company's figures for fraudulent gain (ie bonuses). This is probably not true in the Gulf, where investors have lost billions by investing in British businesses.

    Say the management of those same businesses were to visit the Gulf is there not a chance they could find themselves detained and subject to Sharia law?

    Maybe there will not be such a mass exodus to Dubai after all....

  • Comment number 93.

    We were told weeks ago more or less what the results would be so yes today's formal annoucement is irrelevant. Focusing on it is irrelevant.

    Perhaps the BBC could rename this blog

    banks, banks banks, banks, banks, banks, banks, banks, banks, banks, banks, banks, banks, banks, bonuses, banks, banks, bonuses, bonuses, banks, banks

    Or maybe its nearly right

    pick, pick, pick, pick, pick, pick, pick, pick, pick, pick, pick, pick, pcik, pick

    Enough already

  • Comment number 94.

    Sounds to me like Barclays are just trying to face it out. Most of the so called profit are by the way of balance sheet revaluations.

  • Comment number 95.

    Robert Robert Robert

    since Obama's rather surprising announcement last Weds that he would cap US bankers' pay, a move which presumably caught our lot napping, you have run what appears to have been a straw poll on this blog on behalf of the British govt:

    so 6 reports and over 1500 posts later, the issue of bankers' bonuses has seen an avalanche of comment; well over 90% of it has been squarely against bonus payments of any sort in any circumstances except where legally unavoidable.........

    and as a result what do we get? the pretense of that strangest of animals - an independent enquiry! run by an industry insider and eventually reporting about a year from now

    in other words the classic tactics for trying to get the public off the case

    and the British govt reluctantly shuffle along behind the latest American initiatives

    we all remember a dozen other, similar, pointless or fake enquiries don't we, Iraq and WMDs remaining the most notorious

    so will we also get sexed-up summaries and spin of the findings in this case, coming in the run-up to the general election a 14 months from now? presumably so

    I don't know about everyone else but I am now completely tired of this banking thread; but I have not become apathetic about it; I remain hopping mad about it and will not forget what the leading Anglo-American banks have done, in cahoots with the FSA, SEC and govt ministers in many cases.

    So can we now move on to the 'REAL' economy again please!

    What about some of these for a while:

    effect of personal and co. insolvencies

    rising unemployment

    the continuing crisis in the car industry

    the decline of manufacturing

    China: economic and political strains

    protectionist moves

    the coming crisis in PFI schemes

    the pension crisis

    the strains between Euro members: political and economic

    the countries on the verge of insolvency such as the PIIGS

    the ongoing mess in the housing market

    the meltdown of the construction industry

    public service and local govt issues

    carbon trading fraud

    disappearance of sustainable and enviro issues from the agenda

    is there any hope for the G20 meeting achieving anything?
    -----------------
    And get yourself out of London for a day or two, which might help you to develop some balance in what you report

    Rome is burning whilst you are still fiddling on with this bankers' bonus tune

  • Comment number 96.

    On a slightly different note, perhaps you could get your chums to give you the audited financial statements for the Bank of England and the FSA and the Treasury. Also business plan for the new body set up to run the nationalised bits of the system

    Take a look at them

    Oh and while you are at it get hold of the respective performance management regimes

    Just what success might be rewarded??

  • Comment number 97.

    Preston really doesn't get it does he?

    The lack of financial background is showing through yet again.

    The banks will have a bad year in 2007 and 2008 as they have shoved all the losses they possibly can into them. 2009 and beyond they will all make an absolute killing, and have the bonuses to match.

    Barclay's bank is woefully undervalued.

    Its a bonanza if you got in at the bottom.



  • Comment number 98.

    Someone answer this for me...... if this whole mess was caused by a 'city bonus culture' then why is it that National Rock, Bradford & Bingley and HBOS were the first banks to go bust and those that are left standing and in arguably the best health are HSBC and Barclays where there is a much stronger bonus culture than there ever was at the banks that went under.

    The reality is, the arguments about City bonuses are just a complete red-herring and have been peddled by the government to cover up for its own mistakes and lack of effective regulatory oversight. An of course, it suits the envious masses to lap up those arguments and have a moan about those earning a good income working in the City.

  • Comment number 99.

    Peston,

    You are unbelievable!

    I've said this before, and I'll say it again, this crisis is not all about confidence alone but it DOES play a part.

    It has become evident that the BBC cannot produce balanced journalism on the economic crisis. When any positive news is released, the BBC continually pick holes and try to find negatives.

    When Shell recently announced some of the biggest profits in history, somehow the BBC managed to find negatives.

    It is pathetic. Doom and gloom is going to get us nowhere fast. Whilst we battle an economic hurricane, there is no point in trying to make it worse than it already is.

  • Comment number 100.

    Many banks around the world pay their staff a good wage and a small bonus, usually discretionary, based on profitability of the member of staff, their department, and their bank, their attitude to the team, and to customer/client needs. Investment banks, led by the US, and a couple of the global Private Banks, again led by the US, have been 'suckered' into paying bonuses based on revenue each member of staff generated. Now, Bankers, whether they are investment bankers or private bankers, are all members of staff (except for those that are Partners in their own institutions). This resulted in many banks creating their own products, so that they kept all of the revenue rather than selling other companies' products. He this is where things started to go wrong. Banks should be bankers. Deposits, credits (simple), chequeing accounts, trade finance etc. Keep broker houses out of banking, keep insurance companies out of banking, & vice versa, keep things simple. Salaries should be based on experience, ability and track record, bonuses applied only when someone has applied those in an above average way.

 

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