One deal-heavy half at BarCap is not a rebalancing

The Lost Chord is a song, the Lost Decade an economic phase and the Lost Compensation Ratio a statistic that has vanished from the half-year results of Barclays, a bank heavily exposed to pay-related criticism.

Profits before tax from the investment bank formerly known as BarCap dropped 46 per cent to just over £1bn. We may assume that the comp ratio, which expresses pay as a percentage of income, has not fallen with the same alacrity.

Nor does Barclays disclose how many stunned employees remain within BarCap. Barclays’ boss “Saint” Antony Jenkins is whittling this down to meet capital requirements and appease bank bashers.

A few calculations on the back of a Bank of England clawback consultation are required. If the comp ratio had stalled at the year-end level of 43 per cent, BarCap staff would be splitting a £1.8bn pool. Comments from finance director Tushar Morzaria suggest the headcount has dropped by about 2,000 to just over 24,200. The average payout per head would thus be £75,600 against £98,000 last time.

St Antony’s messengers on earth point out that deferrals reduce linkage between pay and financial results.

Moreover, individual pay will vary wildly, with deal doers getting more than the artisan employed to burnish AJ’s halo. Top of the pile will be specialists in M&A and financings. Fees for these activities rose 10 per cent, while income from securities trading dropped 22 per cent.

It is heartening these specialists remain competitive, even as Barclays withdraws from full-service investment banking. But an expansion of their capital-lite activities from a fifth of BarCap’s income to over a third is no foregone conclusion, much as AJ may hope for it. Their income is highly exposed to weakening securities markets.

It is meanwhile understandable that Barclays fears bad publicity following allegations of front-running by clients in trading venues ominously known as “dark pools”. How about a rebrand? “Sunny uplands” has a far friendlier ring.

Fit of the vapers

Strong sterling is the immediate challenge for British American Tobacco, whose interim operating profits slipped 12 per cent to £2.46bn. The long-term battle remains reputational, as regulation of cancer sticks intensifies. Demonstrating admirable chutzpah, Bats is seeking a product endorsement from a Department of Health agency.

This prompts thoughts of old adverts urging Edwardians to smoke Dr Crippen’s Patent Asthma Mix For Healthier Lungs. But the multinational, helmed with sardonic brio by Nicandro Durante, wants a fillip for electronic cigs rather than the combustible sort. Confirmation that vaping is safer than smoking could encourage doctors to prescribe the devices, giving a small but useful fillip to sales.

The group is otherwise at pains to talk down the potential of e-fags. These account for less than 2 per cent of the UK market. They need a wealth warning for investors, if not a health warning for vapers, because popularity is limited.

Big tobacco is probably more than a little afraid of the devices. The business that can patent an ecigarette as satisfying as a regular fag will have a category killer that could also hollow out mature cigarette markets. The old game of combating sales declines with marketing would be over for tobacco giants.

For the moment it continues with BAT resisting UK government plans for plain packaging. A KPMG study found sales of smuggled packs that were branded but untaxed rose from 11.8 to 13.9 per cent of the market in Australia after a similar reform. We may surmise a similar increase in the UK would reduce the tax take by £210m yearly. However, tobacco-funded research has a poor record. Remember Dr Crippen and his Patent Asthma Mix?

Block parties

With the dog days of summer upon us, many City folk are departing for holidays likely to include a chunk of mandatory block leave. For five to 10 days, they are required to foreswear business communications. Not because their lovely employers think they deserve a rest. But because a subset of staff who never take proper breaks are concealing frauds.

The result is distress for law-abiding workaholics. Bankers recalled to the office by the boss to manage a deal can take block leave later on. Their consciences are clear, even if their divorces are imminent. Lesser toil junkies are left monitoring emails, but not replying to them.

This explains why the middle-aged Brit sunbathing beside you on a Greek beach looks grumpy. Back in the UK, a thrusting younger colleague has grabbed the marginal piece of business that would otherwise be his. Buy him an ouzo. He needs it.

jonathan.guthrie@ft.com