Photo: (Photo by Clive Brunskill/Getty Images)
Barclays has appointed its head of retail and business banking Antony Jenkins as its new chief executive, replacing Bob Diamond who was forced out by the Libor rate fixing scandal inJuly. Here is what analysts made of the appointment.
Jason Napier, banking analyst at Deutsche Bank
We view Jenkins as the natural internal choice for the position. He is well known to the market, businesses under his care have performed well (Barclaycard and UK retail and business banking are the only two divisions currently meeting the return on equity targets set under Barclays’ 13% ROE plan), he possesses experience within and without the group, and his reputation and retail heritage provide a base for rebuilding the bank’s reputation over time.
We expect this appointment to trigger sell-side speculation that this will herald a material shift in business from investment banking towards retail and business operations, mathematically leading to greater stability and quality of earnings, a stronger balance sheet, larger shareholder distributions and higher ROEs and P/E multiples.
We expect strategy to remain largely intact, with mix change already in train. We think Basel 3 and industry revenue conditions make a shift of capital allocation away from investment banking inevitable for all players, but see this as incremental rather than revolutionary in Barclays’ case. We expect the bank to stick to its strategy of seeking to operate world leading retail and investment banking operations. We do think, however, that his appointment reduces the chances of a balance sheet kitchen-sinking exercise.
Louise Cooper, markets analyst at BGC Partners
Antony Jenkins is a very different man to Bob Diamond, a retail banker and not an ex trader/investment banker. If you believe (as I do) that the culture of a firm is set from those at the very top, then Barclays under Mr Jenkins will be a very different place to Barclays run by Bob Diamond.
He is both a retail banker through and through and a Barclays man. He is a very different person to Bob Diamond who earlier in his career was head of bond trading at Morgan Stanley, head of Investment Banking, Equity, Fixed Income and Foreign Exchange in the Pacific region at CSFB and at Barclays he engineered the acquisition of Lehman in September 2008.
So who else could Barclays have hired? An external candidate may have been more desirable – a hoped for “new broom” to sweep out the old dirt. However the main external candidate was the ex JP Morgan investment banker, Bill Winters, a breed that is not terribly popular with politicians or the media at the moment. As part of the process of appointing a CEO, there would have been informal discussions with major shareholders to get their opinions and tacit approval. Therefore this decision gives us an insight into the thoughts of both the current executive board at the bank and its main investors – it provides guidance as to the future direction of the business. It may even suggest that boring retail banking has become sexy again in the difficult investment and trading environment. For the time being Barclays is a global Universal bank, but the appointment of Mr Jenkins must raise the possibility that the bank is getting ready for the Vickers report recommendation – to create some split between retail and investment banking.
The first job on Mr Jenkins’ to-do list must be to get a grip on the investment banking business that is still one of the biggest in the world and a significant profit generator for the bank. The loss of Bob Diamond was a big blow to this division so the key profit generating staff need to feel confident in the new CEO. Shareholders will want to see some vision of the future especially given the dire stock price performance since the crisis began (the shares are still below half the previous peak price). Personally, Mr Jenkins needs to be able to handle media scrutiny and parliamentary questioning. He will need to get a grip on the current investigations and massive regulatory changes facing the banking industry.
He must also get used to having a much greater profile – he is relatively unknown – anonymity has now gone. So good luck to the new CEO – from big-hitter-Bob to safe-pair-of-hands-Jenkins – what a difference a financial crisis makes. However please remember that Bob Diamond was only CEO for just over a year, taking the post at the beginning of 2011 and then leaving in the midst of the breaking Libor scandal in July 2012. Let’s hope Mr Jenkins lasts longer than Mr Diamond and does not get forced out by another scandal.
Mike Trippitt, banking analyst at Oriel Securities
We see Mr Jenkins as a highly capable executive who will take a fresh look at the allocation of capital across the group, particularly in a post ring-fenced world and the group’s remuneration policy, particularly within investment banking.
Mr Jenkins’ appointment may refuel the Barclays demerger story. We estimate the investment bank would require an additional £11bn of equity to make it Basel 3 compliant today, requiring a rights issue. We therefore see reallocation of capital and gradual deleveraging as the more likely strategy for the investment bank.
Whilst the shares do appear cheap, they reflect further regulatory risk and the longer term impact of ring-fencing. The prospect of an improved investment banking quarter could lead to some outperformance – more likely a first quarter 2013 event.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers
The bank’s fight to restore its reputation continues. The chairman-elect has clearly given his stamp of approval, with the group appearing to signal a move back to its retail banking roots. The former head of Barclaycard appears untarnished by the Libor scandal, and given his group experience, provides something of a running start.
On the downside, and allowing for both the challenges ahead and the combined political and media scrutiny, questions as to whether Barclays has appointed the best candidate are likely to remain. The new appointee also comes with a lack of investment banking experience – an important current group profit generator – whilst time at the bank during its mis-selling of Payment Protection Insurance (PPI) also needs to be remembered.
In all, news that the Serious Fraud Office has joined the Financial Services Authority in its fund raising investigation may be more important in taking the share price lower in early trading. Developments in the eurozone also remain highly significant, while the fiscal cliff in the US continues to loom ever larger. For now, despite a wealth of uncertainties, with the valuation seen as attractive and the group’s exposure to investment banking providing greater exposure to any economic recovery than rivals, analyst opinion continues to denote a buy.
David Buik at Cantor Index
He had been many people’s idea of CEO to keep continuity going. He ticked all the conservative boxes; he was not flash – a marathon runner and a family man.
I am still amazed that Sir David Walker, [the chairman-elect] arrived at that decision with his colleagues. Though I am personally a great fan of Barclays, to restore the optics, credibility and trust of shareholders and its customers, I thought it was essential that an external candidate was appointed. I am sure that Barclays’ staff will be delighted and they will feel that they can all get behind him. This will be essential as the cumulo-nimbus clouds of concern gather over the entire banking sector. What will be important is the next tranche of management to be appointed. That may help to narrow the optics and credibility gap.
Analysts at Investec
The bank has also been in the news for possible irregularities regarding fee payments in association with its Middle Eastern capital raising efforts in 2008. Given these investigations an external candidate may have been better for Barclays, though with a change of both chairman and CEO the continuity of an internal candidate has some benefits too.
This article originally appeared on guardian.co.uk
Business Insider Emails & Alerts
Site highlights each day to your inbox.