Antony Jenkins was appointed chief executive officer of Barclays (LSE: BARC) (NYSE: BCS.US) on 30 August 2012. Less than two years later, he is arguably faced with the biggest dilemma of his entire career at the bank.
The recurring question is: how should he handle the pending lawsuit in the US?
Reputation Crunch
A couple of years ago, Barclays had to rejig its business model. Reputation was at stake, too. Mr Jenkins brought reputation and experience in retail banking — neither of which, however, has helped the bank deliver on its promises.
A retailer banker, and “a safe pair of hands”, Mr Jenkins was welcomed by investors. After all, Bob Diamond, the ousted former Barclays chief executive, wasn’t the right man for the job in a tougher regulatory environment.
Barclays wanted a boss with no ties to investment banking in order to restore its past glory. With Mr Jenkins, the bank took the brave decision to appoint a long-standing Barclays executive: was it ever meant to be the solution?
Time To Go?
The bank is now in the middle of a lawsuit, for which Mr Jenkins — “Mr Nice”, as he has been dubbed in the City — should take the blame.
If Barclays is proven guilty of any wrongdoing, the resulting economic impact on the bank’s profits may be irrelevant. Still, the board of Barclays must not underestimate the damage that doing things the usual “Barclays way” could bring.
“The notion that there must always be a choice between profits and a values-driven business is false. Barclays will only be a valuable business if it is a values-driven business,” Mr Jenkins said in a memo in early 2013, less than half a year in the job.
“Antony Jenkins talks and acts sincerely about changing his bank – but there are some very familiar faces still on the board,” the Guardian wrote soon after.
Shareholders
Mr Jenkins has distanced himself from previous management. Structural changes had to be implemented, and swiftly. The result?
He has lost the backing of key shareholders from the Middle East, while the ongoing corporate restructuring isn’t as tough as it should be. (Incidentally, Barclays stock has been on its way down since investors from Abu Dhabi decided to cash in last year.)
Barclays has not been better managed than Lloyds and Royal Bank of Scotland over the years, in my view. It was just incredibly lucky to lose out in the fight for ABN Amro, which was bought by a consortium led by RBS in 2008.
Poor Reaction
On 25 June, when Dark Pool allegations emerged in the US, Barclays said: “We take these allegations very seriously. Barclays has been cooperating with the New York Attorney General and the SEC and has been examining this matter internally. The integrity of the markets is a top priority of Barclays.”
The “New Barclays” isn’t too different from the “Old Barclays”, in my view — and that is reflected in its depressed share price.
Key shareholders helped it survive during the credit crunch. Shareholders ask for clarity of intention and action as well as lower bonuses right now. Their calls for change shouldn’t fall on deaf ears.
A Very Long Week
“Barclays boss Antony Jenkins faces one of the biggest tests of his leadership this month when he decides whether the bank, Britain’s third largest, should fight accusations it deceived and defrauded customers in the United States,” Reuters reported recently. In the next few days, Mr Jenkins will tell the world how Barclays plans to act.
Shareholders may bet the farm on Mr Jenkins, in which case they may enjoy plenty of upside if the lawsuit in the US was properly handled. That’s a big “if”, however.
If Mr Jenkins goes, it will take time to find a replacement, which is not ideal, although current leadership is not ideal, either!
Barclays is cheap at 210p per share, but it could get cheaper if Mr Jenkins doesn’t show a commitment to change Barclays as we have known it for many years.
During his tenure, Barclays stock has risen by a modest 15%. The bank’s shares have under-performed the FTSE 100 Index by three percentage points, excluding dividends. Barclays stock has lost 37% of value in the last 12 months alone.
Another mistake, and it could be time to call it a day.
