London: Barclays named Antony Jenkins as its chief executive officer, promoting the head of its consumer business as the UK lender recovers from the Libor scandal and considers whether to shrink its investment bank.
The 51-year-old Briton will become CEO immediately, the second-largest UK lender said in a statement on Thursday. He will lead the bank under incoming chairman David Walker, who once ran Morgan Stanley’s European investment bank.
Jenkins said in an interview that he would “think strategically” about the investment bank’s future given regulatory pressures, and said the division had a “very good team.” Barclays is replacing its most senior managers, including former CEO Robert Diamond and outgoing Chairman Marcus Agius, after politicians, shareholders and regulators accused the bank of having a culture of aggressively interpreting regulations and failing to stop wrongdoing.
Jenkins “has been on the board, he’s knows what the bank’s been doing, he knows the strategy, but he’s never been a practicing investment banker,” Chris Wheeler, a London-based analyst at Mediobanca SpA with an outperform rating on the stock, said of Jenkins. “That will make the people in investment banking nervous, particularly in New York.”
Diamond, who built Barclays’s investment bank into the world’s biggest global bond underwriter, resigned last month after the bank was fined £290 million (Dh1.68 million) by US and UK regulators for attempting to rig the London interbank offered rate.
Jenkins said he will outline his plans for Barclays in the first quarter of next year.
“The challenges that confront investment banking as an industry are driven by regulatory change and the economic environment,” he said on Thursday. “It requires us to think strategically about the direction of investment banking.”
The investment bank is led by Rich Ricci, a Diamond appointee. With increased regulation from Europe and the UK, volatile market conditions for mergers and acquisitions and continuing criticism of bankers’ pay by politicians, Barclays has faced calls from analysts and shareholders to either sell the division or reduce its size.
“The Barclays Capital decade and Bob Diamond will be confined to history,” said Simon Maughan, a financial industry strategist at Olivetree Securities in London. “What investors want to see is far more dramatic cost cutting, and the question is will Jenkins be enough of his own man to do it. It’s not Barclays’s style.”
Diamond, who joined Barclays’s investment bank in 1996, increased profit and headcount over the following 15 years and made the division, previously known as Barclays Capital, the bank’s most profitable unit. The investment bank posted £2.97 billion of pretax profit last year, compared with £207 million when Diamond joined in 1996.
Barclays is the world’s second-biggest underwriter of international bond issues this year, with its 6.8 per cent market share trailing JPMorgan Chase & Co. Barclays was number one in 2011, according to data compiled by Bloomberg.
“Barclays is a strong universal bank,” Jenkins said in the statement. “We have made serious mistakes in recent years. We have much to do.”
Shares of Barclays fell 1.5 per cent to 183.55 pence at 12.13pm in London trading. They are up about four per cent this year, tracking the gain by the Bloomberg Europe Banks and Financial Services Index.
Jenkins must quickly outline his strategy for the investment bank because any delay may cause its top dealmakers to leave, according to Mediobanca’s Wheeler.
“These aren’t great markets for hiring investment bankers, but the good guys, particularly in New York, will go if they feel uncomfortable,” he said.
Diamond bought Lehman Brothers Holdings’s North American operations in 2008, vastly expanding the investment bank’s international presence. The bank is ranked fifth in global mergers this year, having advised on 188 deals valued at $230 billion, according to data compiled by Bloomberg. The firm wasn’t in the top 20 in 2007.
Walker, 72, a former senior UK civil servant and Bank of England official, takes over from Agius as chairman in November. He will review pay policies and may cut the size of the investment bank by as much as 20 per cent, the Sunday Times newspaper reported on August 12, citing people it didn’t identify. Jenkins declined to comment on that report on Thursday.
“If you downsize Barclays Capital’s balance sheet by 25 to 33 per cent, a break-up doesn’t go away but it stops being the issue it was,” said Maughan. Barclays may exit businesses such as its money-market division, which may be less profitable as new regulations come into force, he said.
Jenkins will also have to deal with a criminal probe by the UK Serious Fraud Office, which prosecutes bribery and white collar crime, into fees the bank paid in 2008 to Qatar’s sovereign wealth fund as the lender sought money to avoid a government bailout. The bank additionally faces class action investor lawsuits related to Libor.
Barclays has opened a review into its business practices presided over by Anthony Salz, executive vice chairman at Rothschild. He will review past practices, publish a report to the public and draw up a code of conduct for employees.
Jenkins, who studied politics, philosophy and economics at Oxford University, has been head of retail banking at Barclays since November 2009 after being promoted from CEO of Barclaycard, the bank’s credit-card division, which he joined in 2006. Born in Stoke-on-Trent, England, Jenkins began his career at Barclays in 1983 before moving to Citigroup in 1989, where he worked in London and New York.
Jenkins’ “track record, familiarity with the group and vision for the future are all highly compelling,” Walker said in the statement.
He will be paid a salary of £1.1 million a year and receive incentive pay of as much as 2.5 times his salary, Barclays said in a statement. He will also be entitled to share awards as part of the bank’s long-term incentive plan that could amount to four times his salary in any one year.
“I would have preferred an external candidate, but of all the internal candidates, this was the best appointment,” said Gary Greenwood, a Liverpool, England-based analyst at Shore Capital Group Ltd. with a hold rating on the stock. “I like the fact that he’s a retail banker.”