Barclays (NYSE:BCS) warned on Friday that it may not achieve its 13% return on equity target by 2013 as previously expected after its investment bank recorded its worst quarter in three years.
The U.K.-based bank also said it would cap investment-banker bonuses.
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Total incentive awards were down 26% in 2011, while Barclays Capital decreased incentives by 35%. The group saw bonuses reduced to 1.5 billion, while cash bonuses at its investment bank were capped at 65,000 pounds.
The company posted on Friday 2011 profit of 3 billion pounds, which is down 8% from the year-earlier period. Adjusted return on equity, a closely watched metric, fell to 6.6% from 6.8%, far below the bank’s 2013 target of 13%.
Barclays CEO Bob Diamond called the results unacceptable and warned the 13% target may not be reached as planned by 2013.
“Since setting the target the worse than predicted macro economic conditions, in addition to new regulatory constraints mean that we may not be able to deliver 13% returns by 2013,” he said. “However, we will continue to focus on improving business performance, capital discipline, controlling funding costs, reducing expenses and growing income to deliver a steady improvement in returns moving forward and achieve 13% over time.”
The bank has been hit by a slump in bond trading due primarily to the eurozone debt crisis. Like many of its rivals, including Credit Suisse (NYSE:CS), UBS (NYSE:UBS) and Deutsche Bank (NYSE:DB), Barclays' investment bank has been hit by the volatile markets and toughening regulations.
Barclays pledged to continue focusing on tightening costs in an effort to improve efficiencies and profitability. Early last year, it announced plans to reduce the non-performance cost base by one billion pounds annually by 2013. After cutting 500 million pounds worth of operating expenses in 2011, it now anticipates exceeding the earlier goal by cutting two billion pounds.
Despite the upcoming challenges, the bank still lifted its full-year dividend to 6 pence a share from 5.5 pence previously. Its shares were up 2.5% Friday morning to $14.94.