Barclays is one of the last full-service banks remaining in Europe and the company’s current CEO, Jes Staley, has been in the process of restructuring the bank to take on big U.S. banks like Goldman Sachs and Morgan Stanley.
Current efforts are afoot, particularly by Edward Bramson and his New York investment firm Sherborne Investors, to force Staley to scale back his Wall Street ambitions for Barclays. It seems an odd stance for a company’s investor to be opposed to growth and expansion. Particularly since the U.K. in previous years was known for its international banking prowess. London, during those years, was the first stop for companies looking to raise money. Then the UK banks ventured into the New York arena and got caught up in the 2009 financial crisis. Thus, today, it’s the U.S. banks that “dominate fundraising and trading, buoyed by healthier balance sheets and robust American capital markets,” (ref. WSJ). Barclays absorbed most of Lehman Brothers after their collapse and CEO Staley wants the bank to become a compact version of JP Morgan Chase, where he spent 30 years earlier in his career. The path to making that happen has been long and involved but the bank’s global investing revenue is rising and, to prompt a quicker pace, Staley recently released the head of the investment bank and took the reigns himself. Staley has indicated that the bank has no intention of changing course after all the hard work, saying, “We like the progress we’re making in the corporate and investment bank. . .And we’re going to continue with the strategy we set out three years ago.” In insisting on going forward, Staley is bucking tradition in Europe. Bramson is the primary individual who is pressing for a reversal, arguing that in the “post-financial crisis world only the biggest American banks are in a position to offer the full suite of investment banking products.” Adding, “We believe that the current strategy is untenable in the long run.” Bramson has been pressing to be able to join the Barclays board, saying that he has “significant insight to offer and could be a stabilizing influence on the bank.” The Barclays board, however, strongly opposes Bramson being appointed to the board, calling his style “disruptive and uncollaborative.” Staley has indicated his views by saying, “He wants us to retreat into a foxhole? He should go back to Connecticut.” There have been three meetings, to date, between Staley and Bramson and their teams and these have been reported to be cordial but unproductive. During one of those meetings, a board member told Bramson that the bank’s first-half earnings would be strong enough to quell any strategy doubts, to which Bramson replied that “the market won’t care.” Very peculiar. Apparently, Bramson’s Sherborne Investments thought Barclays’ shares looked inexpensive as an investment opportunity and planned to get the bank to improve its low return on equity by reallocating capital away from the investment bank. This is another of those now-familiar stories where an investment firm hopes to strip a company of its assets – does anyone remember the stories of Sears and ToysRUs? We’ll follow the ongoing “negotiations” and, of course, we’ll be rooting for CEO Staley to prevail.
ALL THE MOVINGS PARTS: THE CEO IS THE FIRST AMONG EQUALS.