Barclays faces shareholder revolt over £27m payout to boss amid profits slump

Pre-tax profits fell to £1.66 billion in the first quarter of 2011 after revenues at Barclays Capital dropped 15% to £3.3 billion as the group dealt with “a challenging external environment”.

The update came as Barclays prepared to face a potential shareholder rebellion at its annual meeting over plans to award chief executive Bob Diamond a potential pay package worth up to £27 million.

Total income, excluding insurance claims, was down 8% to £7.4 billion reflecting the “subdued macroeconomic environment”, while its corporate and investment banking arm saw underlying profits decline 14% to £3.4 billion.

The group hailed the results as a solid start to the year and pointed out that underlying profits, excluding charges for its own debt, increased by 10%.

Impairment charges for bad loans reduced by 39% to £921 million in the quarter. It also said it had taken control of a 10.25 billion US dollar (£6.2 billion) loan to former employees, known as Protium.

Today’s results will increase pressure on the bank to justify its plans for executive pay at today’s annual meeting.

The issues troubling investors include plans to award Mr Diamond a basic pay package of £1.35 million, which is some 23% higher than that of his predecessor John Varley.

Mr Diamond is also set to receive a bonus of £6.5 million for 2010, a future conditional share award of £6.75 million and £13.8 million of shares that he is owed as part of previous long-term performance plans.

The bank also plans to pay some of its staff bonuses in contingent convertible bonds, known as “cocos”, which some investors think are too generous.

These would effectively see staff receive interest of 7% a year on their bonuses, meaning that they will earn extra money while they wait for them to mature in three years’ time.

Investor body Pensions & Investments Research Consultants (PIRC) have advised shareholders not to vote through the remuneration report, while the Association of British Insurers (ABI) has flagged it up as something that needs the careful consideration of investors.

Barclays said its trading in April had been in line with the first quarter although it could not expect the same drop in impairment charges, which had been boosted by its move to take control of Protium.

Shares were down 4% following today’s update.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: “Disappointment that Barclays has failed to keep pace with some of its global peers has been reflected by a dip in the share price.

“Banks in general remain in a difficult place. The uncertainties surrounding regulation, capital reserves and credit availability are overarching, whilst on a local level the current challenges the economy face provide another obstacle.”