Bob Diamond at Barclays, Stuart Gulliver at HSBC and António Horta-Osório at Lloyds are the new generation of British bank chief executives. Diamond and Gulliver have been eagerly waiting in the wings for the chance to deliver their soliloquies. Lets hope the performances go well.
Horta-Osório might have the best chance of success. First, an outsider often finds it easier than an insider to make the tough but necessary choices. Secondly, the ancien régime was so discredited that António merely has to turn up and turn on his engaging smile to be regarded as a hero.
Diamonds task is more difficult. In fact, history might reveal that John Varley, Barclays outgoing chief, is the most astute character in this play. Varley is younger than Diamond and there is no reason why he should relinquish the helm. Maybe he became weary of being overshadowed by the photogenic Diamond. Think Prince Charles and Diana, Princess of Wales. Nevertheless, Varley has seen Barclays through a difficult period. Recently released data shows that Barclays was one of the banks that leaned heavily on the Federal Reserves emergency facilities during the crisis months. Varley bows out, however, leaving the ship stable.
Is it possible that the ship might spring some nasty leaks? Barclays investment bank will face headwinds in 2011 its cost base is too high and its excellent fixed-income franchise might underperform if the great bond bear market begins. Barclays has a large retail operation in Spain that might suffer if that country wobbles. The banks website describes Barclays as Spains sixth-largest banking group and the countrys largest foreign bank. Finally, it might be hard to grow the domestic UK franchise in the era of austerity.
I also think (as I pointed out in my October column) that Diamond will come under pressure to appoint a single chief executive of the investment bank. At the moment both Rich Ricci and Jerry del Missier hold this title. But surely accountability is what counts? Over at HSBC, Stuart Gulliver has already bitten the bullet. In December it was announced (as predicted in this column) that Samir Assaf had been promoted to sole chief of HSBCs global banking and markets business. Gullivers job will be easier than Diamonds because of HSBCs focus on the emerging markets and its strong links with China. Whatever happens next year and I am not as optimistic as most commentators emerging markets should grow faster than the developed world. A source suggests that one issue that Gulliver will face is his close association with the investment bank, where he made his name and which he ran for four years. A bigger challenge is how he will position the bank. HSBC is big but not valuable (as measured by price to book value). It is perceived neither as a first-world bank nor as an emerging markets bank. For investors it is a hybrid stuck in the middle of nowhere safe but not scintillating.
HSBC lost the public relations plot when it came to the saga of Gullivers succession. Boardroom feuds and other salacious titbits were drip fed to the Financial Times by a deep-throat mole. The departure of chairmanStephen Green to the Department of Trade was also leaked to the press and the bank had to rush out a formal announcement. Originally, I had thought that the Green leak emanated from Whitehall but now I am not so sure. A mole murmurs that numerous UK functionaries were aware of Horta-Osórios move to Lloyds, which probably had to be approved by both the chancellor of the exchequer, George Osborne, and the business secretary, Vince Cable, as well as UKFI and perhaps the Bank of England. Not a whisper of this transition reached the newspapers. I can only conclude that someone on the HSBC main board is very embittered. That individual should be ashamed. While an organization is paying your salary, you should have the decency to be loyal to it.
Mike Geoghegan, who left the bank over the New Year, tells Euromoney this month that he intends to spend the new year getting fit, and not living on planes and in airport lounges (see January cover story). But he says he wont stay a beach-bum for long, and that hell be looking to find something that fits with his entrepreneurial leanings and love of emerging markets when his run in the New York marathon is done. But he wont be short of offers to return to the world of banking, and I wonder how long his resolve will last? Recidivism is common among City chieftains: they miss the structure, the salary and the sycophancy. Can a former senior banker really be expected to get up in the morning and disappear into his poky study when a few months before he bounded off to a 21st-century global palace and struck fear and awe into the hearts of thousands of employees? Anyway, I expect to see Geoghegan who at 57 is a relatively young man back in the City headlamps. If I were a head-hunter, he would be on my short list to replace the present chairmen of either Barclays or Lloyds. Marcus Agius, chairman of Barclays, has been an emollient and patrician presence at the bank during the past four years but isnt a different style necessary in this age of rage against the bankers?