Antony Jenkins, Barclays' new CEO: the gut reaction
Given the number of hurdles facing Barclays - new regulation, shareholder pressure for a smaller investment-banking franchise, and ongoing investigations - Jenkins will enjoy no honeymoon.
There was a sense of reluctant inevitability to Thursday’s appointment of Antony Jenkins, who leads Barclays’ retail and business banking division, as its new chief executive.
After all, the other internal candidates have departed or are seen as too close to former CEO Bob Diamond. Here’s what we said in July, following Diamond’s departure:
For chief executive, it is not easy to find strong internal candidates: Rich Ricci, head of the investment bank, is another US investment banker, like Bob; Jerry del Missier, who, just a few days before the Libor fine was announced, moved out of the investment bank to become group COO, may be Canadian but will be viewed similarly. But he is expected to follow Diamond out of the bank.
Both del Missier and Ricci are incredibly close to Diamond. Ricci needs to be persuaded to stay on. He is loyal to the institution, and he will know that the last thing his friend and mentor will want to see, now he has left, is the institution fall apart.
Tom Kalaris is another Diamond acolyte who grew up through the investment bank, but has since made a strong impression in the less controversial world of wealth management. He’s a classy individual who would probably do a good job, but may still be too close to Bob.
Again, here’s what we said in July about Jenkins, seen as one of the most politically palatable internal candidates, and who has overseen a division that contributes one-third of the group’s profit before tax:
The other internal candidate would be Antony Jenkins, chief executive of retail and business banking. He’s British and not an investment banker, which might give him a head start. He is seen by many as a solid, reliable business leader – but the trouble is, not by many of the people at the old Barclays Capital that now dominates the group. At Euromoney, we’ve heard various sneering appraisals of Jenkins’ credentials for group CEO when we’ve mentioned his name to traders and investment bankers. Could Jenkins keep the group together and harness the investment bank?
Although not dismissing the benefits of an outsider, on Thursday, Credit Suisse analysts said the appointment is positive in removing some of the uncertainty for the bank but they do not expect a strong positive share reaction:
Having spoken to the company, there does not seem to be a plan for a major strategic review at this stage, although we would expect Mr Jenkins to spend a significant amount of time reviewing the investment banking operations given this is the area where he has the least experience. There have been no further management changes announced and the statement highlights that Barclays is a ‘strong universal bank’.
There is one immediate take-away: according to William Wright, of Financial News, Jenkins has taken a 29% pay cut.
This establishes a much-needed precedent at the top of the institution. For good reason. As we have reported, this Société Générale chart highlights Barclays Capital has a higher compensation-to-revenue ratio than most of its peers, which makes it one of the few banks where the burden of deferred compensation is rising, while its awarded compensation is higher than reported:
On Wednesday, Barclays confirmed that the Serious Fraud office is launching a second criminal investigation into Barclays in relation to his capital-raising efforts in 2008 via Qatar Holdings. The news adds to the bank's well-known litany of woes from Libor-gate, alleged mis-selling of swaps, return-on-equity challenges and regulatory pressures. Jenkins will enjoy no honeymoon.
An end-July report from Nomura paints the picture:
While there is potential for another leg of relief rally when a “Good” CEO is appointed at Barclays, we would be more inclined to fade that rally as we see a number of potential negative catalysts. There is a vacuum of leadership at the top of the group, with external pressure to reshape the culture and shape of the group. There is a high likelihood that there will be a rethink about the shape of BarCap, in our view, with the risk of more radical RBS-like measures. With a new CEO there are always risks of potential clean-up costs, but there could also be a rethink about the capital position of the group, amongst other things. Additional LIBOR news flow is not necessarily a relative positive for Barclays.
It is simply too early to say how Jenkins will approach Barclays’ manifold challenges, and to what extent a lack of emotional bias and time bias towards investment-banking will influence his strategy, especially since he is seen as a consensus-building executive.
His demeanour and background make one thing clear: the age of red-blooded, aggressive investment bankers at the helm of global banking institutions is effectively over. Like the sedate former accountant Douglas Flint, now HSBC chairman, Jenkins is seen as more sensible and humble than his predecessor at a time when the trust between bankers and the public at large has hit a new low.