Barclays warns to miss profit goal

Fri Feb 10, 2012 6:19am EST
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By Steve Slater and Sarah White

LONDON (Reuters) - British bank Barclays (BARC.L: Quote) is set to miss a key profit target after its investment bank ended 2011 with its worst quarter for three years.

A slump in bond trading income due to the euro zone debt crisis dragged down annual profit, prompting Chief Executive Bob Diamond to push back a return on equity (RoE) target of 13 percent he set less than a year ago.

"The idea of 13 percent is pie in the sky, and even getting to 10 percent is a long way away," said Alex Potter, analyst at Berenberg Bank. Return on equity is a measure of profitability.

Rivals including Credit Suisse CSGN.VX, UBS UBSN.VX and Deutsche Bank (DBKGn.DE: Quote) have all struggled to maintain profitability in their investment banks during 2011, hit by volatile trading and tougher regulations.

Diamond did not abandon his RoE target, but said: "Thirteen percent remains absolutely the right target and its very achievable, but we may not achieve it in 2013 given the impact of the external environment."

The bank's return on equity of 5.8 percent last year, from 7.2 percent in 2010, was "unacceptable," he said.

"They need to get harder in restructuring these banks," Potter said, adding the bank is still not getting to grips with its high staff costs.

Barclays said it had cut bonuses at investment banking division Barclays Capital (BarCap) by 32 percent from the year before, and incentive awards across the group were down 26 percent.   Continued...

<p>A lamp featuring a logo of Barclay's bank is seen outside a branch in London October 31, 2011. REUTERS/Suzanne Plunkett</p>