Jes Staley is making something of a name for himself at the helm of Barclays – and not just for his gaffes.
There have, it must be said, been a few of those. Whether accidentally referring to his Barclays colleagues as great ‘Morgan’ executives (although some of them certainly have been), or managing to get sucked into email correspondence with a prankster (although he wasn’t alone in that), or dealing with whistleblowing complaints in a way that displeased regulators (although not so much as to deem him unfit for his role, they said), Staley hasn’t always stood out for the right reasons.
But there’s a lot more to his tenure as Barclays CEO than that.
Since he took over in 2015, he has re-oriented the bank around a transatlantic strategy that has often confounded the doubters. The investment bank is doing pretty well.
And he has shown a determined streak in his fight against activist shareholder Edward Bramson, not least in the way that he has doubled down on the kind of investment banking and markets businesses that Bramson would rather Barclays downgrade or exit.
In 2017 he hired the bullish Tim Throsby from JPMorgan to run the investment bank, and in particular to make its markets businesses rediscover their appetite for risk.
But he showed no reluctance to jettison Throsby either, downgrading his role in a reshuffle in March 2019 that left Throsby little alternative but to walk out of the door.
Bumped down
Now he’s at it again. Having approved Throsby’s elevation of Joe McGrath to run Barclays’ banking business in 2017 and the appointment of Stephen Dainton to run first equities and then the whole of markets – a role in which he has been singularly successful among European peers, culminating in Euromoney awarding Barclays the award for the world’s best bank for markets in 2020 – he has bumped them both down in another reshuffle.
Dainton now has to make do with being deputy head of markets to the division’s new head, the bank’s former chief risk officer, CS Venkatakrishnan – who is, like Staley, an ex-JPMorgan executive.
McGrath, meanwhile, has moved sideways into the role of chairman of investment banking, with responsibility for directing the allocation of risk-weighted assets to the banking business.
Taking over at the helm of banking is Paul Compton, who was president of Barclays Bank PLC and also hailed from JPMorgan.
The last big reshuffle, the one that saw Throsby exit, made quite a bit of sense to people who weren’t Bramson. Once the dust had settled, it was clear that it had simplified the structure of the bank, reorganizing its divisions so that bits such as the international consumer business no longer sat awkwardly alongside the investment bank under Throsby.
The latest rejig looked odd at first, since it seemed to go against some of the streamlining achieved by the previous reorganization – and add some more confusion for good measure
But, as with that rejig, the latest one looked odd at first, since it seemed to go against some of the streamlining achieved by the previous reorganization – and add some more confusion for good measure.
Bear in mind that when Staley took Throsby’s role out of the structure in 2019, the bank took pains to note that the heads of banking and markets would now sit on the group executive committee and report directly to Staley.
Dainton and McGrath have not been bumped off the exco as part of the latest changes, meaning that the investment bank now has an extraordinary wealth of representation there.
But looked at through the lens of succession planning, the new reshuffle makes a lot more sense.
Stretching
As Staley told staff when announcing the changes internally, part of the job of leading a team involves “identifying opportunities for colleagues to stretch and build experience”.
Staley might have been overseeing the investment bank after Throsby left, but in practice it was Compton who was keeping an eye on it. As such, with a CV that already included serving as Barclays chief operating officer and the CEO of Barclays execution services, Compton looked like he was being prepared to take over from Staley when the time comes for him to move on – something that is expected in the next few years.
But bank CEOs often don’t seem to welcome obvious successors. Much more appealing to some is the competition below them for the top job.
Goldman Sachs’s Lloyd Blankfein managed that trick well with David Solomon and Harvey Schwartz below him, before Solomon emerged as Blankfein’s heir in 2018.
Staley is doing something similar here. It might be frustrating to McGrath and Dainton that they have to make way to let it happen – although as yet there is nothing to indicate that either of them is frustrated enough to jump ship, however odd it might seem from the outside to see them shifted from their roles.
Compton was already overseeing the investment bank, but his new role explicitly puts him at the heart of the client business within banking.
Venkatakrishnan, on the other hand, had served as chief investment officer for asset management at JPMorgan, but was probably seen as needing some more recent senior investment bank experience.
When Bramson complains about the risks of a markets business that he likes to refer to as a ‘black box’, putting a former chief risk officer in charge of it doesn’t look a bad move
When Bramson complains about the risks of a markets business that he likes to refer to as a ‘black box’, putting a former chief risk officer in charge of it doesn’t look a bad move.
Not only that, but Compton and Venkatakrishnan are also jointly running the investment bank and have an explicit mandate to find ways for banking, markets and the corporate bank to work more closely together.
This is not just a rejection of criticism of the bank’s stubborn attachment to the investment bank, but an assertion that it can help the rest of the firm more than it already does.
It also means that whichever of them does eventually follow Staley to the top, Barclays will be led by someone who is inextricably linked to the investment bank.
Last man standing
That matters internally as much as externally. More than ever, Barclays right now looks like almost the last man standing in European investment banking in the face of US dominance of the sector.
With the shrinking of Deutsche Bank as a force in that business, that role might once have been assumed by BNP Paribas. It might still be, but Staley’s repositioning of Barclays has probably put it ahead of the French bank in that regard for the moment, certainly when it comes to being able to participate in investment banking and capital markets on US soil.
Barclays has long been trying to beef up its presence in continental European investment banking, but Brexit might mean that BNPP has scope to build on its hold over euro-denominated markets. Conversely, it might strengthen Barclays’ grasp of UK-US business.
It is not clear how long Staley will stay at Barclays. So far, he has weathered a few storms that might have persuaded a less determined figure to throw in the towel. That he has not done so is a measure of how convinced he is that a UK bank can still compete in full-service global investment banking.
His latest gambit should leave investors – and investment bank staff – in no doubt as to where he sees the future of Barclays. Whether or not his successor is able to see that through remains to be seen.
