Barclays under Antony Jenkins is a mess in transition
Some have dubbed Antony Jenkins' reign at Barclays a work in transition. To me, it is undoubtedly a mess in transition.
To recap, low-key Jenkins took over as chief executive from high-profile Bob Diamond in the autumn of 2012 as the hysteria surrounding the Libor-fixing scandal swelled. Jenkins, a retail banker, promised to clean the Augean stables and investors hoped for a more even division of the spoils between employees and owners.
Barclays is a story that I follow closely. Partly because I once worked at the firm and partly because I was fascinated by the charisma of Diamond and the way in which he lured investors to follow him, in snake-charmer fashion, through various adventures, including purchasing Lehman Brothers in September 2008, a time when the world was falling apart.
I don’t know whether it is my female intuition or an insider’s antennae but, in hindsight, my musings on Barclays last year resonate resoundingly. The tale seems to be unfolding exactly as I predicted. When Jenkins was appointed, I was sceptical and wrote in my September 2012 column: "Barclays is in desperate need of cultural change. Is Jenkins really the ideal candidate to achieve this?"
In February 2013, after 100 days in office, Jenkins unveiled a strategic plan that talked about job cuts, business closures, an increased return on equity and better rewards for shareholders. My March 2013 column warned: " The market loved [Jenkins’s strategic plan], with the share price rising by some 8% in the next few hours. But there are choppy waters ahead. Jenkins has to negotiate the tricky annual bonus round. How will he incentivize the restless investment banking troops? The new culture of parsimonious pay may not be as appealing as the old regime of fulsome largesse." I also grumbled that a lot of senior Barclays employees had been there for years and it would be hard for them to throw off the shackles of the ancien regime: "Leopards can change their spots and perhaps crony capitalist investment bankers can get religion. But drawing a line under the past? A complete change of culture? Please don’t talk nonsense."
Then, in April 2013, we had the Salz report, an independent review of Barclays’ business practices. This voluminous review cost £17 million to produce and railed about Barclays’ "warped pay levels, entitlement culture, and lack of transparency". I flicked through the 230-page document and was amused to see clause 1.8, which stated: "Our recommendations are based on business practices and culture prevailing in autumn 2012. On January 17 2013, Antony Jenkins announced the launch of new group-wide values. On February 12 2013, he announced changes to the scope of Barclays’ business. Antony Jenkins and the Barclays board have rightly pressed ahead with making changes rather than waiting for our recommendations. As a result, a fair number of our suggestions have already been identified by Barclays and are in the process of being implemented."
If I were a Barclays shareholder, I would be throwing my bowl of porridge at the pristine white walls and generally having a temper tantrum. In that paragraph, Salz essentially said: "Despite being paid £17 million, we have taken so long to produce our report that our fairly obvious conclusions have already been arrived at by management and are being implemented." Not for the first time in following the numerous hiccups that represent Barclays’ trajectory across the world financial stage, I rolled my eyes heaven-wards.
|In the war for talent, I am not sure if Jenkins is a hypocrite or if he has lost control of his troops. Indeed, did Jenkins ever have any real control over the investment bank’s senior staffers, most of whom date back to the good-old, bad-old Diamond days?
In his report, Salz explained that he had been tasked to make recommendations as to how: "Barclays can rebuild trust and develop business practices which make it a leader, not only among its banking peers, but also among multinational corporates more generally." He also quoted an internal memo that Jenkins penned to employees on January 17 2013. The fearless leader expounded: "There might be some who don’t feel they can fully buy in to an approach which so squarely links performance to the upholding of our values. My message to these people is simple. Barclays is not the place for you, the rules have changed."
Let us pause and turn our attention to the values that Jenkins enunciated in early 2013. As I write, some 12 months after they were formulated, these values of respect, integrity, service, excellence and stewardship have a slightly hollow ring. Why do I say this?
Jenkins disappointed investors last summer when Barclays unexpectedly raised capital. Many investors felt that they had been led to believe such dilution would not be necessary. This episode would have dented the view that Barclays embodied the values of respect, integrity, excellence and stewardship.
And then, in February this year, Barclays announced its fourth-quarter results for 2013 and Jenkins’s halo fell to the floor. There was a cacophony of criticism. Full-year pre-tax profit, adjusted for exceptional items, fell by a third in 2013 over 2012, to £5.2 billion ($8.6 billion). Profits before tax at the investment bank fell 37% to £2.5 billion, with a hefty decline in FICC revenues. Nevertheless, the compensation-to-income ratio at the investment bank rose by some 3% year on year, and current-year bonuses rose 19%. Dividends were flat. Analysts worried that Jenkins would not be able to cut group costs to £16.8 billion a year, as he had previously promised, when costs actually rose in 2013 to over £19 billion. For the fourth quarter of 2013, the investment bank made a loss.
The whole episode reminded me of a French farce. The Barclays’ year-end results were rushed out a day ahead of schedule because of an article in the Financial Times that estimated the results and that Barclays felt was "too accurate". Then Jenkins started warbling about the need to pay bankers "competitive packages" and the "global war for talent" and everyone’s eyes glazed over.
I am not sure if Jenkins is a hypocrite or if he has lost control of his troops. Indeed, did Jenkins ever have any real control over the investment bank’s senior staffers, most of whom date back to the good-old, bad-old Diamond days? But one thing is certain: the values of respect, integrity, excellence and stewardship have been undermined by the board’s decision, once again, to elevate employees above shareholders. And the remaining value of "service" seems also to have been sullied. Around the time of the disappointing financial results, news trickled out of an alleged theft of confidential information relating to as many as 27,000 clients.
A source fulminated: "I suppose Jenkins is well-meaning and he made a big gesture by not taking a bonus this year. But I think he lacks the essential quality of leadership. He tries to portray himself as the good guy, but allows everyone else to gorge at the trough. Why can’t he persuade others to buy in to the message of restraint?"
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