Barclays reports profits up 92% to £11.6bn
Discussion
Wot no Barclays Profit/pay thread? Right I'll start with a fine bit of trolling.
"There’s something scandalous about Barclays Capital’s profits - the scandal being just how low they are.
The subsidiary made £2.46bn last year. However, its total assets at the start of the year were £1629.1bn. So its profits are only 0.16% of these assets. And they are only 1.1% of risk-weighted assets.
In other words, Barcap’s profits are large simply because they have thrown lots of capital at low-margin activities.
And risky activities too. Barcap estimates that its 5% VaR last year was £77m - which means there’s been a on-in-20 chance of it losing eight days of average profits (or more) in a single day every 20.
It’s been picking up pennies in front of a steamroller.
Barcap itself estimates that its return on average economic capital has been healthier - at 15%. However, it defines economic capital as the “minimum…required for the group to maintain its credit rating.” This is less than actual capital employed.
And even this number compares badly to other businesses. It’s less than the return on capital of the average non-financial services company.
Barcap, then, is not freakishly profitable - quite the opposite.
Which raises the question: why is it paying an average bonus of £95,000 per worker?
One possibility is that it requires huge skill to make even a tiny profit margin. But is this really the case at a time of record-low short-term interest rates?
Another possibility is simply that the bonuses are a return to power; bankers, unlike non-financial employees, have the power to extract capital for themselves, and must be bribed to not do so.
http://stumblingandmumbling.typepad.com/stumbling_...
"There’s something scandalous about Barclays Capital’s profits - the scandal being just how low they are.
The subsidiary made £2.46bn last year. However, its total assets at the start of the year were £1629.1bn. So its profits are only 0.16% of these assets. And they are only 1.1% of risk-weighted assets.
In other words, Barcap’s profits are large simply because they have thrown lots of capital at low-margin activities.
And risky activities too. Barcap estimates that its 5% VaR last year was £77m - which means there’s been a on-in-20 chance of it losing eight days of average profits (or more) in a single day every 20.
It’s been picking up pennies in front of a steamroller.
Barcap itself estimates that its return on average economic capital has been healthier - at 15%. However, it defines economic capital as the “minimum…required for the group to maintain its credit rating.” This is less than actual capital employed.
And even this number compares badly to other businesses. It’s less than the return on capital of the average non-financial services company.
Barcap, then, is not freakishly profitable - quite the opposite.
Which raises the question: why is it paying an average bonus of £95,000 per worker?
One possibility is that it requires huge skill to make even a tiny profit margin. But is this really the case at a time of record-low short-term interest rates?
Another possibility is simply that the bonuses are a return to power; bankers, unlike non-financial employees, have the power to extract capital for themselves, and must be bribed to not do so.
http://stumblingandmumbling.typepad.com/stumbling_...
VaR, as a function of returns, is by implication a function of past volatility. The data used will include observations throughout the crisis, which naturally will show higher volatility, thereby raising the VaR. Take the figure with a pinch of salt - it's not literally how much it currently has on the line, it's the maximum expected loss in 95% of cases (or rather, the loss exceeded in only 5% of cases) based on past events.
ZondaMark said:
VaR, as a function of returns, is by implication a function of past volatility. The data used will include observations throughout the crisis, which naturally will show higher volatility, thereby raising the VaR. Take the figure with a pinch of salt - it's not literally how much it currently has on the line, it's the maximum expected loss in 95% of cases (or rather, the loss exceeded in only 5% of cases) based on past events.
Albeit most banks are still using elevated levels of vol in their models having got so badly burned in 2008/9, so one could argue that it currently is a "safer" measure than it might have been historically. rocksteadyeddie said:
ZondaMark said:
VaR, as a function of returns, is by implication a function of past volatility. The data used will include observations throughout the crisis, which naturally will show higher volatility, thereby raising the VaR. Take the figure with a pinch of salt - it's not literally how much it currently has on the line, it's the maximum expected loss in 95% of cases (or rather, the loss exceeded in only 5% of cases) based on past events.
Albeit most banks are still using elevated levels of vol in their models having got so badly burned in 2008/9, so one could argue that it currently is a "safer" measure than it might have been historically. 
ZondaMark said:
rocksteadyeddie said:
ZondaMark said:
VaR, as a function of returns, is by implication a function of past volatility. The data used will include observations throughout the crisis, which naturally will show higher volatility, thereby raising the VaR. Take the figure with a pinch of salt - it's not literally how much it currently has on the line, it's the maximum expected loss in 95% of cases (or rather, the loss exceeded in only 5% of cases) based on past events.
Albeit most banks are still using elevated levels of vol in their models having got so badly burned in 2008/9, so one could argue that it currently is a "safer" measure than it might have been historically. 
But this is PH. Outrage matters.Jasandjules said:
If a Merchant bank is making money it is usually at the expense of the competition.... IIRC when I was in banking it was the Trading Arm of Barclays which made the money whilst the banking side just about broke even...
Added to which Barcaps aquisition of Lehmans US business was brilliant. There's no other word for it. A British Co for once reverses the long steady decline of UK business by staging a fantastic coup de grace seizing a once in a lifetime opportunity in the markets......
......and receives a steady barrage of media critcism for daring to make some money.
Timmy35 said:
Jasandjules said:
If a Merchant bank is making money it is usually at the expense of the competition.... IIRC when I was in banking it was the Trading Arm of Barclays which made the money whilst the banking side just about broke even...
Added to which Barcaps aquisition of Lehmans US business was brilliant. There's no other word for it. A British Co for once reverses the long steady decline of UK business by staging a fantastic coup de grace seizing a once in a lifetime opportunity in the markets......
......and receives a steady barrage of media critcism for daring to make some money.
rocksteadyeddie said:
Timmy35 said:
Jasandjules said:
If a Merchant bank is making money it is usually at the expense of the competition.... IIRC when I was in banking it was the Trading Arm of Barclays which made the money whilst the banking side just about broke even...
Added to which Barcaps aquisition of Lehmans US business was brilliant. There's no other word for it. A British Co for once reverses the long steady decline of UK business by staging a fantastic coup de grace seizing a once in a lifetime opportunity in the markets......
......and receives a steady barrage of media critcism for daring to make some money.
Bing o said:
rocksteadyeddie said:
Timmy35 said:
Jasandjules said:
If a Merchant bank is making money it is usually at the expense of the competition.... IIRC when I was in banking it was the Trading Arm of Barclays which made the money whilst the banking side just about broke even...
Added to which Barcaps aquisition of Lehmans US business was brilliant. There's no other word for it. A British Co for once reverses the long steady decline of UK business by staging a fantastic coup de grace seizing a once in a lifetime opportunity in the markets......
......and receives a steady barrage of media critcism for daring to make some money.
Bing o said:
Did the Jap media jump all over Nomura for doing the same thing I wonder?
Somehow I very, very, very much doubt it. I've seen first hand the, uh, how to put it, uh, well, um, the behaviour of the staff at Nomura in London who perhaps originated from the same location as Nomura in respect of the staff who, uh, did not originate from the country where Nomura started.... Take a look at the senior staff of Nomura.......Jasandjules said:
Bing o said:
Did the Jap media jump all over Nomura for doing the same thing I wonder?
Somehow I very, very, very much doubt it. I've seen first hand the, uh, how to put it, uh, well, um, the behaviour of the staff at Nomura in London who perhaps originated from the same location as Nomura in respect of the staff who, uh, did not originate from the country where Nomura started.... Take a look at the senior staff of Nomura....... I used to work for TMI. Know exactly what you mean. Funny old lot. Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff