Welcome to Barclays, John McFarlane, here’s what life has to offer: a fresh £800m provision for rigging currency markets, taking the running total to £2bn.
The new chairman won’t be surprised by this turn of events, but you can understand why the old one, Sir David Walker, closed his speech at the annual meeting last week by thanking shareholders for their patience. The tide of provisions at Barclays has been so strong since 2012 that investors are weary of ever seeing the cleaned-up, technologically savvy bank the chief executive, Antony Jenkins, keeps talking about.
McFarlane, with a newcomer’s zeal, pledged at the same meeting to hurry things along. “We need to get the errors of the past behind us,” he declared, bemoaning the fact that Barclays’ shares still trade below book value. Full marks for ambition, but one has to wonder whether, even in a year’s time, a shiny new Barclays will be visible.
First, it is the regulators who dictate the speed and scope of settlements. A complication in the foreign exchange case was the entry of Benjamin Lawsky, the head of New York’s Department of Financial Services. That prompted Barclays to opt out of a deal in the US, UK and Switzerland agreed by six other banks last year.
A new multi-bank mega-settlement, this time including the US Department of Justice, is said to be due next month. But no deadline is hard in this field. Nor is it clear whether Barclays will be able to settle all the allegations in a single job-lot.
The second challenge is that the regulatory headaches extend well beyond forex. As Barclays’ annual report reminds investors, the Serious Fraud Office is still investigating the terms of the Qatari fundraising in 2008; and the DoJ and the US Securities and Exchange Commission are looking at compliance with US bribery laws. Then there is an entirely separate investigation into Barclays’ handling of “dark”, or private, trading pools. The list goes on.
In the chairman’s seat at the insurer Aviva, McFarlane struck like a whirlwind. Businesses were sold, capital was reallocated and a big cost-cutting plan was drawn up. Barclays, under Jenkins, has a similar strategy but is still dragging about £65bn of non-core assets.
McFarlane sounds impatient, which is a good place to start, but Barclays is not Aviva. Let’s see if he is so fizzy after a year in the regulatory wringer.
Next has a spring in its step. M&S should take note
Normal service is resumed at Next: sales in the first three months of the year were ahead of forecasts. It was always the way to bet. The chief executive, Lord Wolfson, may have been “very cautious” last month about the year ahead, but a touch of spring sunshine always helps a well-run clothing retailer. Next shareholders will get a 60p special dividend because the share price remains well above the self-imposed buy-back limit, currently £68.27.
Rival Marks & Spencer should take note of that latter point. Next month it will give an update on returns to shareholders. M&S hasn’t had the luxury of boosting investors’ returns meaningfully for a while, and it may be that initial plans are confined to the ordinary dividend.
But, if M&S has greater ambitions, it should copy Next’s approach. Admit that buy-backs can’t be justified at any price. Put a cap on the price you will pay, and explain your calculations.
Sainsbury’s shareholders must be kept in the loop
Here’s a question that doesn’t crop up often. If you are a FTSE 100 company and your chief executive has been sentenced to two years in prison in Egypt should you inform your shareholders?
The company is Sainsbury’s and the Times revealed that Mike Coupe was convicted, in his absence, of embezzlement last September in bizarre proceedings related to the supermarket chain’s short-lived business in north Africa 14 years ago.
The case is farcical, it hardly needs saying. Coupe was in London on 15 July last year when it is claimed he seized cheques in the Egyptian city of Giza. Sainsbury’s lawyers will surely get the case quashed.
All the same, a conviction is a conviction and Coupe had to travel to Egypt last weekend to enter an appeal. Should companies disclose such facts? Sainsbury’s says it was advised there was no need to utter a word. OK, but commonsense says that, if it was safe for Coupe to put in a weekend appearance in Egypt, it would have been polite to let shareholders know about the legal judgment, even if it is ridiculous.
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