Retail therapy
“John McFarlane was always going to get someone else in, and when he does find someone, that will create a much more stable platform for change,” Box explained.
James added that a key determinant will be the new CEO’s ability to run Barclays once it has shed its ‘non-core’ assets, which include the fixed income, commodities and trading arms, alongside retail units in Italy, Spain, Portugal and France.
He said: “Once the ‘non-core bank has been removed, what is left will be roughly two-thirds retail banking-type business and one-third investment banking, with a commitment to not letting the investment bank side get any bigger.
“The new CEO will most likely be of a retail banking background, and their mandate is unlikely to contain anything very much different to the previous one, other than the speed with which the non-core bank disappears.”
Still, considering that Jenkins came from a background in retail banking, even taking into account the emphasis on efficiency, there is still some ambiguity in the bank’s declaration that it is seeking someone with a “new skill set”.
“It appears that the disagreement between Jenkins and the board stemmed from the pace with which he was effecting the restructuring,” said James. “They had a choice to make: let the non-core bank run down slowly and get as much capital out of it as you can, or do it quickly and accept the charge of doing that. The board have opted for the latter, but for Jenkins the idea of just burning capital was probably quite frightening.
“The capital required for the individual business has gone up massively over the past few years, so the assets that were added two or three years ago – while at the time they were sensible – are not so sensible now. Something has to be done, and the big debate is how quickly it should happen.”
However, Box believes that rather than being down to “skill sets”, this was a decision based on more personal issues.
“In a restructuring there needs to be a very clear mandate,” he expanded. “You are constantly battling other egos, and if you do not have that then you are not going to get very much done. It was more of a governance issue than Jenkins’ ability as a manager.
“[Jenkins’ replacement] will have the backing of a very strong chairman, which will lend the new CEO much more strategic clout internally and room to manoeuvre. Jenkins did not have that – he was just another guy who ran a division internally, and found it difficult to impose himself on the investment banking guys.”
