Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

BZW results hit by staff costs

Jill Treanor Banking Correspondent
Wednesday 19 February 1997 00:02 GMT
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

Profits at BZW, Barclays' investment banking arm, dropped by 29 per cent last year in stark contrast with many of its rivals which made record profits, writes Jill Treanor.

Operating profits at BZW slid to pounds 204m in 1996, confirming the concerns of many analysts who had feared that heavy staff turnover at BZW, run by Bill Harrison, the recently installed chief executive, would take its toll. Despite the profits fall, however, BZW set aside an additional pounds 22m to pay bonuses last year.

Banking analysts remain worried about BZW's prospects for this year. One said that if the bank could not muster a good year in 1996 then perhaps it never would. And several analysts yesterday started to downgrade their forecasts for the whole Barclays banking group, amid concerns that City expectations had been pitched too high.

Overall, total costs at BZW rose by pounds 160m. That was much faster than income which rose by just 7 per cent in the year.

The rise in costs was even sharper in the second half. Martin Taylor, chief executive of Barclays, said costs rose 20 per cent when compared with the first half. In the second half, when most of the management changes took place, BZW produced less than pounds 50m of operating profits.

BZW's return on equity was just 8 per cent in 1996, and Mr Taylor said that would not be tolerated for long.

Of the pounds 160m increase in costs, he said pounds 120m could be attributed to payments to staff. BZW spent pounds 45m on "upgrading" - hiring and firing staff - during the year.

"This is an entirely deliberate process. What we could have done is do nothing. That would have achieved a higher profit today and a much weaker business," Mr Taylor said.

He said Barclays was committed to developing BZW into a "formidable competitor" but predicted that costs would remain high in the first half of this year, especially as BZW was due to start moving to new offices in Canary Wharf in London's Docklands in April.

The real question, he said, was when the new staff would start to generate revenue.

BZW has hired several top executives since the death of David Band, its chief executive, early last year. Mr Harrison was hired from Robert Fleming to replace Mr Band while Bob Diamond was brought in from Credit Suisse on a multi-million pound pay deal to head the markets division.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in