Is Barclays PLC Failing Shareholders?

There may be a conflict of interest between Barclays PLC (LON: BARC) executives and its owners.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.


Barclays (LSE: BARC) (NYSE: BCS.US) released its results last week. In short: profits are down, bonuses are up and the dividend is flat. Barclays’ chief executive, Antony Jenkins, is in a bind. He claimed he would clean up the bank’s act after taking over last August after Barclays was rocked by a £290m fine for rigging interest rates.

Has he cleaned things up?

The issue of bonuses is a sticky one for Jenkins, having previously promised restraint on pay. Bonuses increased to £2.4 billion in total — up from £2.2bn a year ago — despite profits falling by nearly a third. For investors, those sums might seem hard to add together.

Pertinently, the dividend remained flat, which led to the Institute of Directors to question who the business is being run for. Is it the bank’s executives? Or its owners? While Jenkins argues that he’s merely paying the market rate to keep the best talent at the bank, it does look outlandish.

As far as shareholders are concerned bonuses are meant to be variable — when the going is good, they go up, while in tough times, they go down. Barclays would argue that it’s in the long term interests of shareholders to offer attractive pay to hold on to top talent.

Adding insult to injury for shareholders is that they were only tapped for £5.8bn through a rights issue in October. Further cost-cutting is necessary to boost capital, with up to 12,000 jobs at risk. Given that there’s an ongoing drive to rebuild the bank’s reputation, this doesn’t do Barclays any favours.

Barclays’ biggest problem

If you’re an investor this is all a smokescreen over a much bigger issue. Late last year Barclays suspended six foreign exchange traders over alleged manipulation of the global currency market. Global foreign exchange markets are worth £3.2tn and the probe into the banks is widening.

These allegations have the potential to be just as bad as the Libor scandal — when £3bn was wiped off Barclays’ value as shares fell 16% — with the investigation set to drag into 2015. The seas look choppy for Barclays and the potential for fines could be enormous.

For an investor you have to assess how much risk you’re willing to take on. Further big fines could yet emerge, while all the losses haven’t yet been absorbed relating to Libor. There’s a reason its share price is cheap, valued at around 9 times earnings, but it’s hard to argue Antony Jenkins isn’t doing well — since he took over, the stock is up 50%. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Mark does not own shares in any company mentioned.

More on Company Comment

Hand of person putting wood cube block with word VALUE on wooden table
Company Comment

Value has been building behind the Diageo share price

Despite the business growing, the Diageo share price first reached its current level just over 19 months ago and hasn't…

Read more »

Older couple walking in park
Investing Articles

5 stocks to buy for high and rising dividend income

I can see a host of shares to buy on the FTSE 100 offering me exceptional levels of income. Here…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I don’t care if FTSE 100 shares fall further, I’m buying them today

I'm happy to go shopping for FTSE 100 shares today, even though I accept that they could have further to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Rolls-Royce shares are down 18% in a month and I’m finally going to buy them

Investors who bought Rolls-Royce shares have been repeatedly disappointed, but I'm willing to take a chance on them before they…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

How I’d invest £10k in a Stocks and Shares ISA today

Now looks like a good time to buy cheap FTSE 100 shares inside a Stocks and Shares ISA. These are…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Today’s financial crisis is the perfect moment to buy cheap shares

I'm building a portfolio of FTSE 100 stocks by purchasing cheap shares whenever I see an opportunity. There's a good…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

I’d buy Tesco shares in October to bag their 5.4% yield 

Tesco shares have fallen lately but I think this makes them attractively valued for a dividend stock I would aim…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I would do anything to hold Diageo in my portfolio (but I won’t do that)

Diageo is one of my favourite stocks on the entire FTSE 100 and I'd love to hold it, but one…

Read more »