Barclays gutted in energy trade as bonus limits spark exodus

Barclays Plc spent a decade assembling a team of the most successful gas and power traders in Europe. It took less than 16 months to lose most of them.

Mercuria Energy Trading SA, based in Geneva, hired five members from the group of about a dozen from March 2011 to June this year, including Phil Sutterby as head of U.K. and European gas and Roger Jones, the former global chief of commodities, according to people with knowledge of the moves. Another six left for companies including UBS AG, Noble Group Ltd. and Freepoint Commodities LLC.

The departures from the U.K.’s second-biggest bank reflect bonus caps, limits on the amount of money traders can risk and shrinking revenue from the division that includes commodities. While hiring from hedge funds and rival lenders helped Barclays catch up with Goldman Sachs Group Inc. and Morgan Stanley in commodity derivatives, according to Greenwich Associates, a focus on deferred pay left the bank vulnerable to headhunters.

“The significant amount of deferred compensation and the aggressive cap on cash payouts at Barclays has unsettled a number of individuals,” said Peter Henry, New York-based head of front-office research at Commodity Search Partners. “Add to that the fact they have been systematically targeted by privately held trading houses, specifically Mercuria, and it’s fairly understandable why senior traders are leaving.”

Aurelie Leonard, a spokeswoman for the bank in London, and Mercuria Chief Investment Officer Paul Chivers declined to comment on the moves Aug. 17.

Libor Penalty

Barclays has also been shaken by the resignations of its three top executives. Chief Executive Officer Robert Diamond and Chief Operating Officer Jerry Del Missier left last month after the company paid a record fine for manipulating the London interbank offered rate. Chairman Marcus Agius departs Oct. 31.

The company made it harder to retain staff in February, when cash bonuses at the securities unit were capped at 65,000 pounds ($103,000), increasing the portion paid in later years and in stock. In the first half, Barclays cut the amount commodities traders can lose in a day, known as value at risk, or VAR, to 6 million pounds from 14 million a year earlier, according to the company’s latest financial results. That compares with a 13 percent decline in all trading at the bank.

Revenue from fixed income, currency and commodities peaked at 13.65 billion pounds in 2009 before slumping 36 percent in 2010 and another 27 percent in 2011, the company said in its financial results. The measure rose 11 percent in the first half of 2012, “reflecting improved performance in rates and commodities,” the bank said in its latest earnings.

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