Less than three months on from the sacking of Antony Jenkins, the Financial Times reported that – subject to regulatory approval – former JP Morgan Chase & Co executive James Staley is to be named as Barclays new CEO in the coming weeks.
But is Staley – who is currently a managing partner at BlueMountain Capital Management – the right man for the job, and what would his appointment mean for Barclays?
Given Staley’s background in investment banking – alongside the widespread view that his predecessor was ousted over his retail expertise – one potential avenue is a revamping of Barclays Capital, the firm’s investment banking business.
“We will see what Staley’s plan is,” said James Box, banking analyst with Brewin Dolphin. “Obviously he has credibility and comes from a very good organisation, but people are a bit perplexed by his investment banking background.
“Maybe he is the man to properly restructure Barclays Capital, and this hire is symbolic of Barclays having more growth ambition for its investment banking arm as opposed to optimisation.
“Some banks have scaled back their investment bank so that it serves the rest of the business well i.e. keeping on high net-worth individuals. Barclays needs to find a way of doing that. If there is a renewed focus on getting it right, then great. But if it is a focus on growing it unnecessarily, then I am not sure it is the right way to go about it.”
Barclays shares have been on a steady downward trajectory since Jenkins’ sacking in July, and by 11.35am on 13 October had dropped a further 2.86% in morning trading.
Russ Mould, investment director at AJ Bell, believes that improving Barclays’ investment banking arm could boost investor sentiment around the bank.
“Investment banks are generally a good business for employees and a bad one for shareholders, rather like football clubs,” he said. “Investors tend to attribute a low valuation to them, as they are volatile, cyclical, soak up a lot of regulatory capital and come with high wage bills.
“Any fresh moves to boost returns from Barclays’ underperforming investment banking business will therefore be welcome, especially if its balance sheet continues to shrink. A reduced exposure may leave the bank with less potential for growth but it could lower the risks associated with, and improve the predictability of, its overall profits, and therefore prompt a re-evaluation of its shares.”
