Barclays sacked CEO Antony Jenkins for effectively doing the job he was originally called in to do, sources tell Business Insider.
When he took the top job in 2012, Jenkins was charged with repairing the tattered reputation of the bank by tackling its “toxic culture,” downsizing the investment bank, and focusing more on retail operations.
And he did just that — except maybe too quickly, and by too much. Crucially, he did it without boosting earnings at the same time.
In the intervening years, Jenkins was given two nicknames by staff. The dual monikers reveal how Jenkins’ reign split staff between those appreciated that he was trying to build a new, more ethical Barclays; and those who thought he was a wimpy do-gooder unsuited to lead the bank’s aggressive investment arm: “Mr. Nice” was a nod to the how he was trying to drag the bank away from illegal practices like fixing interbank interest rates. “The Wet Handshake” was preferred by those who didn’t like him, source tell us. (Some in the media also called him “St. Antony.”)
Ultimately, investment banking staff, shareholders and members of the board realised that even though they had asked the reformer to change their bank, they grew tired of the taste of the medicine they prescribed.
Barclays’ new executive chairman, John McFarlane, told CNBC TV that Jenkins “hadn’t done anything wrong … he’s just not the right person to take us forward.“
“He (Jenkins) was good at executing what we asked him to do at that time. What we are asking him to do now is different and the board believes that the probability of my executing is higher.”
As McFarlane said in his interview with the BBC: “it’s not just a reduction in costs, it’s a change in the way we do things that’s required here.”
After a few months at the helm of Barclays, Jenkins unveiled his “Transform” programme which he hoped to unravel the legacy issues from the bank and said “performances and rewards would be judged against a set of core values, including integrity and respect for others.”
He also confirmed that Barclays would gut the investment bank and cut 19,000 people out of its workforce by 2016, with around 7,000 to be borne from investment part of the bank.
That kept the politicians and the public happy after Barclays became the first bank in 2012 to settle with US and UK authorities over London Interbank Offered Rate (LIBOR) manipulation. Libor is a measure of the average interest rate banks are willing to lend to each other at and is used internally to set the price of financial products worth billions of pounds.
But problem was that he didn’t keep the staff and shareholders happy.
Litigation costs and fines mounted up and the profit making centre, the investment bank, was being gutted from the inside out. What’s left is underperforming. Since his departure, the markets rejoiced and the Barclays stock price rocketed rose by over 3% on the hopes his successor would bring the bank back to its soaring profit hey-days.
Barclays wanted Diamond, politicians wanted Jenkins
Jenkins took over from Bob Diamond in 2012, under pressure from politicians following the LIBOR fixing scandal.
Diamond, an American, was a rock star in the City. His motto was “earn success every day” and he was focused on growing Barclays into a global investment bank that could take on Goldman Sachs on Wall Street. Over the past few years, a number of Barclays employees told me how Diamond was “inspirational” and a “real leader.” His motto was their war cry.
Barclays was all about risk, high returns, and a focus on cutting-edge trading technology. Retail finance was a mere sidecar to keep consumer operations in order.
However, Diamond was largely blamed for fostering a “toxic culture” which led to the bank’s Libor fixing fine. In July 2012, British politicians called Diamond and the bank “
rotten,” and the former Barclays boss “grossly incompetent” and “complicit and negligent” in a Treasury select committee grilling, following the Libor fixing fine.
So Barclays looked to hire the polar opposite of Diamond — and Jenkins was waiting in the wings.
Jenkins had run the group’s retail operations for several years, and has long been dubbed “The Mr. Nice” of British banking by the UK press. Even his motto was radically different to Diamond’s — “helping people achieve their ambitions, the right way.”
He even abstained from taking his £1 million ($US1.5 million) bonus the first year after taking over from Diamond in 2012. He even gave staff an extra day of holiday a year, just so they could do something to help them pursue their own personal goals.
But his effect on the staff and shareholders was nothing like as inspiring compared with Diamond’s, say some employees. One Barclays employee repeatedly referred to Jenkins, when talking to me, as “The Wet Handshake.”
Jenkins was not immediately available for comment but in his leaving statement he said:
“In the summer of 2012, I became Group Chief Executive at a particularly difficult time for Barclays. It is easy to forget just how bad things were three years ago both for our industry and even more so for us. I am very proud of the significant progress we have made since then.
“Most of all, I am proud that we have defined our culture through a common set of values for the Group and that the progress we have made and the tough decisions we have needed to take have all been achieved by applying these values and by focusing on the needs of all our stakeholders.”
“I want to thank the people of Barclays for their tireless efforts and support in achieving these results and for my own part I am looking forward to the professional opportunities that lie ahead.”
Paying to lose money
He implemented the bank’s restructuring programme, “Transform,” which cost a lot. Barclays estimates that the total price will range between £1.7 billion ($US2.6 billion) to £16.8 billion ($US25.8 billion) by the end of this year. So effectively, Barclays is paying to lose money — cutting the profit-making centre and paying large costs to clean up the mess of the past.
“I reflected long and hard on the issue of Group leadership and discussed this with each of the Non-Executive Directors,” said Barclays’ deputy chairman Sir Michael Rake. “Notwithstanding Antony’s significant achievements, it became clear to all of us that a new set of skills were required for the period ahead. This does not take away from our appreciation of Antony’s contribution at a critical time for the company.”
Barclays chairman John McFarlane even confirmed later, in no uncertain terms, the bank fired Jenkins. While the bank wanted and needed to cut jobs and scale back some businesses, the criticism came from not focusing on making the operations the bank does have, more efficient.
“Barclays is not efficient, we are not productive, we are cumbersome,” said John McFarlane to the BBC. “We have [a] very large bureaucracy and personal accountability is not as high as we need it to be. And so it’s not just a reduction in costs, it’s a change in the way we do things that’s required here.”
Jenkins cut too much of Barclays, too quickly
While Barclays’ PR staff lauded Jenkins with nice blurbs about how well he did over the last few years, most people in the banking industry knew that some senior executives felt they had created their own Frankenstein’s monster — someone who was cutting jobs at the investment bank at such a speed that it was making the bank unprofitable and inefficient.
Senior sources have told me that Sir Mike Rake, the deputy chairman of Barclays, approached the new chairman, John McFarlane, to say that a number of board members were unhappy with the speed of change at the bank.
They wanted cost cutting to go further and more attention paid to the investment bank which is seen as under-performing.
It is thought that Sir Mike [Rake] wants Barclays to retain its global presence as a major investment bank whilst Mr Jenkins felt it should be cut back.
Employees told Business Insider just how happy they are that Jenkins has left.
One Barclays employee, who works in the FX department, told me: “I am cautiously optimistic. There could be a real opportunity for reform that will strengthen the investment bank. Jenkins seemed to only care about retail operations, so it will be interesting to see if the new guy will rip up his legacy or choose to maintain it.”
Another member of staff, who also works in the investment bank in trading operations, added: “I think a lot of people are excited about what this means for Barclays, particularly those in the investment bank. I hope it means change for the better, especially as it seems that the disagreement was about the lack of focus on the investment banking side. This seems to be the general feeling too.”
Meanwhile, according to job ratings website Glassdoor, Jenkins’ overall CEO approval rating has fallen since 2013:
Barclays needs to make money too
It’s easy to see why people were getting fed up with Jenkins’ approach to turning around the bank.
In Diamond’s hey-day, around 2006 (prior to the credit crisis) and a year after he became president of the group, the bank posted a massive 25% rise in net income to £21.6 billion ($US33.2 billion). Profits before tax also shot up by 36% to £7.2 billion ($US11.1 billion).
Now fast-forward to Barclays’ most recent statements.
In 2014, Barclays reported pretax profit tanked by 21% to £2.26 billion ($US3.47 billion) from the year before. Its first quarter results were even more devastating — profit fell 52% £465 million ($US714 million) because of the litigation costs and fines.
When Jenkins took over he had to deal with some major scandals, which eventually spilled over into his tenure.
For example, in May, Barclays was fined a total of £1.5 billion ($US2.4 billion) by the US Department of Financial Services and the UK’s Financial Conduct Authority, in connection with the LIBOR currency market and interest rate rigging scandal.
The regulators noted that between January 1, 2008, and October 15, 2013, Barclays’ systems and controls over its FX business were inadequate, which enabled traders to rig the markets.
Barclays is also battling New York Attorney General Eric Schneiderman. In June last year, Schneiderman filed a securities fraud lawsuit against Barclays. He claimed that the bank gained an unfair edge through its high frequency trading (HFT) and “dark pool” trading practices. HFT allows you to buy and sell large quantity of trades incredibly quickly, via automated software. Dark pools are trading platforms that allow these trades to be bought and sold anonymously before the wider market becomes aware of them.
All these lawsuits are costly. For instance, it paid out £3.7 billion ($US5.7 billion) in currency market manipulation litigation costs in 2014 as well as costs associated with dealing with a number of retail investor mis-selling scandals and writedowns from property loan portfolios.
Effectively, Barclays is continuing to pay to solve legacy issues and restructuring the bank, but at the same time it is dismantling the area that generates the profits that fuel those payments — the investment bank.
So what now?
Barclays’ executive chairman John McFarlane said:
Arriving at Barclays with a fresh perspective, it is evident that we have a standout brand with first-class retail, commercial and investment banking businesses. Nevertheless, we are leaving value on the table and a new approach is required. As a Group, if we aspire to bring shareholder returns forward, we need to be much more focused on what is attractive, what we are good at, and where we are good at it.
We therefore need to improve revenue, costs and capital performance. We also need to become more externally focused and deal with the internal bureaucracy by becoming leaner and more agile. I have experienced good results in dealing with these matters elsewhere.
So while it is highly unlikely that Diamond will return to Barclays, it is almost certain that Jenkins will be replaced with someone that has worked in investment banking and understands the importance of driving investment banking but to what it was, well, without the market manipulation.