Bob Diamond Is Barclays Best Friend

Barclays investment division boss, Bob Diamond, has been given a 36 million pound reward by the bank, even as their share prices continue to slump and the bank was forced to write off 2.8 billion pounds during the previous year because of the credit crunch. The reward includes his 250,000 pound salary, 6.5 million pounds in bonuses, 3 million pounds worth of shares, which he will receive if he passes performance conditions and a 11.3 million pound share award, which was held in a trust for 3 years.

But investors might not be too happy with the rewards being dished out to Mr. Diamond as shares of the bank have consistently fallen and have now touched 444p and even though the bank has posted a 7.1 billion pound profit, which was roughly the same figure posted in 2006, investors still have seen their share value drop by almost 40% in the past year. Barclays had also increased its lending to borrowers in the US to 29.3 billion pounds in 2007 from 17.5 billion pounds in the previous year, which could also worry investors since the US sub prime crisis could make recovery of that money very difficult. Investors and analysts both predict that the bank would have a tough time to maintain their profit figures in the current year. But Barclays justified the payout to Mr. Diamond by saying that even though the bank had to write off billions of pounds in write-offs, Mr. Diamond had still managed to exceed profit targets set at Barclays investment banking division. A spokesperson from Barclays added that it was a clear illustration that Bob's incentives were clearly aligned with those of shareholders. Investors could find some solace in the fact that the shares owned by Mr. Diamond too have reduced in value in 2007 by 21 million pounds and are currently valued at 51 million pounds.

Mr. Diamond's pay packet was kept a secret till he joined the bank's board after which all the details had to be declared as per the rules. It has since then emerged that he is the highest paid investment banking boss, ahead of Giles Thorley of Punch Taverns 11 million pound pay packet and Bart Becht of Reckitt Benckiser's 22 million pounds. The banks statements also revealed the amounts that were paid to other top executives. Naguib Kheraj, a former director at Barcleys was paid 600,000 pounds per month with an additional 14,178 pounds per month as benefits during the bank's doomed takeover bid for ABN Amro bank and was also paid 4.9 million pounds along with 657,000 pounds at the end of April for helping his replacement to settle in. But Barclays also justified these payments by saying that these were very much withing the benchmark limits. Incidentally, the chief executive of Barclays was paid 2.4 million pounds as salary and bonus. Analysts such as Jon Kirk of Redburn Partners, however, caution that the current year poses a lot of challenges to Barclays since the bank will require to either retain or roll over 500 billion pounds of wholesale funding, which could pose a problem in case the credit crunch does not ease. The Bank has also accumulated 11 billion of weak or substandard assets, which is twice of what it had in 2006. The credit derivatives, which the bank held for trading purposes has also doubled to 2.4 trillion pounds, up from 1.2 trillion pounds and loans given to borrowers too have increased from 282 billion pounds to 346 billion pounds.

Even as Barclays tries to justify the high sums of money paid to some of its top bosses including Mr. Diamond, investors are finding it hard to digest the fact that these bosses seem to get rewarded even though the bank has not managed to increase its profits or even maintain its share value. However, Bob Diamond seems to be laughing all the way to the bank, at least in the current year.

Read our latest make money reviews - Learn how to make money online.

Article written by: Craig Parker - Make Money Expert