Barclays just hired the man who could unravel everything the bank’s former boss Antony Jenkins was hired to do — to turn Barclays into a more high-street-friendly lender and move away from the risky world of investment banking.
Barclays’ chairman even made a little dig at how different Staley is compared to his predecessor:
Barclays is an incredibly important, broad and complex business. Appointing an individual with the business scope, seasoning and track record is a difficult challenge.
In Jes Staley we believe we have an executive with the appropriate leadership talent and wide-ranging experience to deliver shareholder value and to take the Group forward strategically. In particular, he understands corporate and investment banking well, the re-positioning of which is one of our major priorities.
Staley is the opposite of ousted CEO Jenkins. He’s a hedge fund manager at the US-based BlueMountain Capital. Two years before that he was the CEO of JPMorgan’s investment-banking and asset-management unit. He oversaw the bank’s “expansion in to alternative investments” and earned huge sums even during the credit crisis, when his bank had to use some of the US government’s temporary bailout funds.
Even in 2007, he earned a salary of $US400,000 (£260,311) and a total compensation of $US16.7 million (£10.9 million) for just one year.
Now at Barclays, Staley will receive an annual salary of £1.2 million ($US1.8 million) and an extra £1.15 million ($US1.7 million) delivered in shares as part of role-based pay. Staley will also receive cash to help relocate him from the US to the UK. His bonus includes a discretionary incentive award up to a maximum value of 80% of fixed pay and an award under the Barclays Long Term Incentive Programme up to a maximum value at grant of 120% of fixed pay.
On top of that Barclays will give Staley £1.93 million ($US3 million) in share awards because he forfeited this amount of shares from one of his previous employers, JPMorgan, when he took up the CEO role at Barclays.
This makes him far more like Barclays’ big, bold, and brash former boss Bob Diamond, who was hugely successful until he left the bank in the few months after Barclays became the first lender to settle with US and UK authorities over rate-fixing allegations in 2012.
This is a huge deal because now the rumoured merger between Barclays and an investment bank with a strong US presence doesn’t seem so ridiculous — in fact it actually ties in with what a leader like Staley would support.
The CEO in waiting
In 2012, Barclays tried to rehabilitate its image after it became the first bank to settle with UK and US regulators over manipulating Libor.
Libor, or the London interbank offered rate, is the daily measure meant to show the rate at which banks will lend to one another. It is used to price hundreds of trillions of dollars’ worth of financial products.
Staley, who was at JPMorgan at the time, was at a juicy stage of his career.
In 2009 he was promoted to CEO of the Wall Street titan’s investment bank. This was after leading the group’s asset-management division and before that the lender’s private banking unit.
He told Fortune Magazine in 2010 that he would “take an office at [hedge fund] Highbridge and sail” if he didn’t get to head the bank someday. It was clear he was aiming for the top job at a publicly listed bank.
It was no surprise at the time to hear him touted as being groomed to take over from chairman and CEO Jamie Dimon at some point in the future.
More important, in 2012 he was reportedly shortlisted to take the CEO role from Diamond at Barclays, after Diamond resigned amid great pressure from politicians, the public, and his own bank.
More like Bob and less like Antony
You’ve got to feel sorry for Jenkins. He was hired because he was primarily the opposite of Diamond and was fired for carrying out the transformation of the bank.
Jenkins worked for Barclays for 30 years — give or take a few years when he moved to Citigroup in 1989 for a short stint.
Basically, Staley lost out to Jenkins when it came to the top job at Barclays in the aftermath of Diamond’s departure.
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.
He was known as the “Mr. Nice” of banking and was the retail chief for Barclays. He was the exact fit for what Barclays was looking for at the time — to keep the public and politicians happy after the Libor-fixing scandal. His clunky motto was “helping people achieve their ambitions, the right way.”
He was the antidote to Diamond — an American rock star in the City.
Diamond’s motto was “earn success every day,” and that was his employees’ war cry. During Diamond’s reign, 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.
But Diamond was largely blamed for fostering the “toxic culture” that led to the bank’s Libor-fixing fine.
According to various reports including one from CNBC, Staley was about to snag the role of CEO at Barclays but lost out because he was too similar to Diamond. Reports said Barclays was just too worried that having another American Wall Street man at the helm of a British bank would keep the lender in constant scrutiny.
The bank took a bet and hired Jenkins, who after a few months at the helm of Barclays unveiled his “Transform” programme, hoping to unravel the legacy issues from the bank. He said “performances and rewards would be judged against a set of core values, including integrity and respect for others.”
Jenkins even abstained from taking a £1.5 million ($US2.3 million) bonus in 2012 because he thought it would be unfair.
Back to investment banking
Staley’s appointment shouldn’t come as a shock, really.
Three years ago, Jenkins confirmed that Barclays would gut the investment bank and cut 19,000 people out of its workforce by 2016, with around 7,000 to be borne from the investment part of the bank. The group focused on strengthening its retail business and paring back on investment banking.
Jenkins’ Transform programme was estimated by Barclays to cost £1.7 billion ($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. The last set of profits under Jenkins’ watch tanked by 26% to £1.34 billion (£2.1 billion), as reported in April.
“I reflected long and hard on the issue of Group leadership and discussed this with each of the Non-Executive Directors,” Barclays deputy chairman Sir Michael Rake said in July this year. “Notwithstanding Antony’s significant achievements, it became clear to all of us that a new set of skills were required for the period ahead.”
Now it looks as if the “set of skills” is that of the Diamond era, which Staley has in abundance. Rumours that Barclays is researching rival European investment banks with a strong presence in the US now make more sense.
John McFarlane, who has been in charge of Barclays since Jenkins left this year, made it even more plausible when he did an interview with the Financial Times this month saying European investment banks should merge to create a regional champion to take on US rivals.
Jenkins would have run a mile from a deal like this. Staley was built for this kind of merger. In fact, we should have seen Staley being drafted in sooner.