Dip in profits puts the skids under targets at Barclays

Diamond, pictured, set Barclays the target of achieving a 13% return on equity by 2013 when he took over from John Varley at the end of 2010. But today the bank said this key measure of its performance dropped from 7.2% to 5.8% last year.

Diamond said: "We are not satisfied with the return on equity we delivered in 2011 and are committed to delivering steady improvement moving forwards. We are sticking to the 13% target but that may not happen in 2013. Certainly if chairman Bernanke [of the US Federal Reserve] is right about there being another two or three years of virtually zero interest rates, that makes it much harder."

Analysts had already discounted Barclays hitting its return on equity targets because economic conditions had worsened since Diamond set them.

Barclays shares rose 11.4p to 244.4p - their highest since July last year.

It's the first of the major UK banks to report its full-year results for a period when they have been under intense scrutiny over lending and bonuses. Diamond ducked the subject of his own bonus today.

But Barclays said that bonuses across its investment bank, Barclays Capital, had been cut by 30% to an average £64,000 for the 24,000 people who work there.

Additionally, it said annual bonuses for the executive directors and eight highest-paid executives were cut by 48%. That is certain to include the heads of BarCap, Jerry del Missier and Rich Ricci, whose pay packages were £14.3 million and £14 million last year.

BarCap's profits fell 32% to £3 billion last year as trading volumes reduced sharply in the final quarter.

However, finance director Chris Lucas said: "Though it is too soon to suggest a trend, improvement in market conditions resulted in an encouraging start to the year for Barclays Capital."

Elsewhere there was strong growth in UK profits, up 60% to £1.4 billion, Barclaycard, up 48% at £3.3 billion and Africa, up 26% to £908 million.

European losses were reduced and corporate banking recovered from losses to a modest profit.

Diamond said: "We expect the economic and regulatory environment to continue to be challenging in 2012 but, as we have shown in the past year, Barclays is improving its competitive position across all of our businesses and working hard to support economic growth more broadly."

The dividend for the year has been raised 9% to 6p a share.