Mac the knife strikes again.
John McFarlane, the Barclays chairman since April, has form as a slayer of chief executives. While non-executive director at Aviva in 2012, he helped oust the hapless Andrew Moss and filled the chief executive post himself until he found a successor and could revert to being chairman.
The demise of Antony Jenkins at Barclays was presented as a decision of all the non-executives, with the deputy chairman, Sir Michael Rake, to the fore, but the final call is always the chairman’s. As at Aviva, McFarlane will become stand-in chief executive, promising an all-action performance more to the liking of shareholders.
Naturally, investors cheered. They love a no-nonsense boss who promises to slash bureaucracy, improve returns, cut costs and tickle the dividend. “I have experienced good results in dealing with these matters elsewhere”, said McFarlane, less than humbly. Barclays shares rose 3%.
Kind words flowed for Jenkins but the gist of the message was clear: not enough energy and too many committees – 375, said McFarlane – meant better returns for shareholders were in danger of disappearing over the horizon. The new motto is “acceleration”.
Up to a point, one can understand the frustration. Jenkins’ brand of woolly management speak often jarred. Few of us ever understood what the ambition to build “the go-to bank” really meant. On this view, Jenkins, a retail banker, was a useful antidote to Bob Diamond and his crew of muscular investment bankers but lacked the dynamism to give the new-look Barclays a bigger kick.
The group’s adjusted pretax profits increased 12% to £5.5bn last year, but statutory profits were down 20%. The investment banking division continued a miserable run with return on of equity of just 2.7%. “I am not a very patient person”, Jenkins declared in March, probably aware that the behind-the-scenes muttering said he was exactly that.
But before Jenkins is consigned to history as too ineffectual, consider whether McFarlane’s promised hard-driving approach is any clearer. The motoring metaphor sounds exciting, but what, for example, does it mean for the investment bank? Does it have a future or not?
Hard-driving, in McFarlane’s mouth, does not mean what it did in the old days under Diamond. McFarlane will be as aware as Jenkins that the old days brought scandal, monstrous fines and disgrace. So is he a sceptic of the overpaid investment bankers’ ability to earn their keep? Or does he want to take another lap of the track, just in case? Jenkins toyed with the question inconclusively. Thus Barclays’ statement that ditching Jenkins “does not signal any major change in strategy” fails to solve the great investment banking conundrum. Outsiders never knew what the strategy was, or how small the division was meant to be, in the first place.
Or is hard-driving code for another dose of old-fashioned cost cutting in the retail and commercial banks? There probably will be more of that, just as there was at Aviva. But it is not a risk-free strategy if you also want to grow revenues. A “leaner and more agile” bank may strike punters as one that is understaffed.
Put another way, all banks must serve three masters – regulators, customers and shareholders. There is no route around regulators these days, so the balance between shareholder and customer demands is critical. McFarlane wants happier shareholders, but the trickier task is to satisfy customers simultaneously. However much McFarlane plays up the parallels with Aviva, the Barclays bus looks harder to handle.
This article was written by Nils Pratley Financial editor, for theguardian.com on Wednesday 8th July 2015 13.34 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010