You would think that a doubling of its profit would win Barclays PLC some respect. But not from Chris Dillow, the acerbic British journalist behind the Stumbling and Mumbling blog. He targets Barclays Capital, the investment banking arm of the financial giant for a round of abuse. His gripe? It’s not that Barcap made too much money in 2009, it’s that it made too little.
By Dillow’s calculations, Barcap had a return on assets of a paltry 0.16% over the past year. “In other words, Barcap’s profits are large simply because they have thrown lots of capital at low-margin activities.”
Dillow is less than impressed. He notes that Barcap’s activities put a lot of value at risk and that even by the company’s generous definitions, it is earning less on capital than the average non-financial services company.
All of this raises an interesting question. Why is Barcap paying an average bonus of about $156,000 to each of its workers, given their rather meager ability to produce a decent return for shareholders? It’s a question that could be asked not only of Barcap but of many investment banks.
Freelance business journalist Ian McGugan blogs for the Financial Post