Barclays' key investment bank arm ended 2011 with its worst quarter for three years as the euro zone debt crisis hit bond trading, dragging the British bank's annual profit down on the year before.
Barclays said today it had cut bonuses at investment banking division Barclays Capital by 35% from the year before, and incentive awards across the group were down 26%.
Barclays, the first of the big UK banks to report, has come under pressure to rein in pay for bankers and its boss, Bob Diamond, in the face of a tough economic climate.
Barclays, which is Britain's fourth-biggest bank by market value, reported a pre-tax profit of £5.9 billion for 2011, down 3% on the year and below analysts' forecast of £6.1 billion, according to a company poll. Net profits dropped 16% to £3 billion sterling.
Income at BarCap fell to £1.8 billion in the fourth quarter, down 19% on the previous three months. A slump in bond trading and advisory work hammered all banks late last year, and BarCap fared worse than some US rivals.
Its return on equity slumped to 5.8% for the year, from 7.2% in 2010 and less than half its target of 13%.
"We are not satisfied with the return on equity we delivered in 2011 and are committed to delivering steady improvement moving forwards," Diamond said in a statement.
"We expect the economic and regulatory environment to continue to be challenging in 2012," he added.
Barclays said losses on bad loans fell by a third from 2010 to £3.8 billion and also said that it had reduced its sovereign exposure to Spain, Italy, Portugal, Ireland and Greece to £7.1 billion from £8.2 billion in 2010.
The results come after weeks of conflict over UK bankers' bonuses, in which Royal Bank of Scotland chief Stephen Hester turned down his £963,000 bonus amid mounting pressure and Lloyds boss Antonio Horta-Osorio waived his own payout following a leave of absence.
UK banks miss SME lending targets
The UK's banks missed targets for lending to smaller businesses in 2011 by more than £1 billion, according to figures released today.
The five banks - Lloyds Banking Group, Royal Bank of Scotland, Santander, Barclays and HSBC - loaned £74.9 billion to small and medium-sized enterprises (SMEs) in 2011, the British Bankers' Association said.
They had agreed with the Government in the Project Merlin talks to make £76 billion of lending available.
But the banks loaned a total of £214.9 billion to all UK businesses, exceeding their target of £190 billion.
