THERE have been many crucial days already during Antony Jenkins’ short tenure at Barclays, but today will be the most important of all.
After months of investor complaints that he has not moved aggressively enough to tackle the bank’s cost-base, Jenkins’ strategy update needs to convince a growing number of sceptics.
Initial indications are that he will be radical: more than 20,000 job cuts before the end of 2016, equivalent to about 15 per cent of the workforce, and about £100bn of assets pooled into Barclays Non Core, a new unit ring-fenced from the rest of the group.
Those look like sensible measures, but this week’s first-quarter results suggest that he may have to move even harder and faster.
The decline in fixed income trading, responsible for a halving of profit in the first three months of the year, has caught out investment banks across the City and Wall Street, so few blame
Jenkins for Barclays’ exposure to those headwinds.
Yet while rivals’ cost-cutting has been brutal, Barclays has tended to slice at the periphery.
That has, partly, had the consequence of many of Bob Diamond’s lieutenants remaining in place until recently, but their departure should make the next phase of blood-letting easier.
If borne out, that will buy Jenkins some breathing space. For investors, the pace of cost-cutting has been as much of an irritant as the row over rising remuneration in the investment bank.
So prodding Barclays’ owners to look squarely in the direction of a tidied-up core bank with falling variable pay and improved returns will offer an immediate veneer, at least, of the numbers heading in the right direction.
Jenkins only has one chance to get this right. Re-calibrating return and profitability targets has, after all, become a wearily familiar tale for Barclays shareholders.
ORIEL – SOMETHING TO BRAGG ABOUT
Another City firm expected to be in the spotlight this morning, albeit on a lesser scale, is Oriel Securities.
Ten weeks after it entered talks to be acquired by Stifel Financial, the New York-listed finance group, a deal is finally expected to be confirmed today.
Valuing Oriel at more than £35m, the takeover will allay any lingering concerns about Oriel’s future after a record first quarter for the mid-cap broker. Ongoing capital markets activity should lend itself to a further run of new business.
Insiders say that Stifel will allow Oriel to continue to operate independently of KBW, its other investment banking operation with a London presence.
The deal may also provide broader cause for optimism about the prospects for a prolonged City upturn.
And for Simon Bragg, Oriel’s chief executive, it will deliver vindication after an uncertain few months, as well as a handy multimillion pound payday.
WATCHING THE WATCHDOG
Bad enough that the City watchdog botched a media briefing to the extent that George Osborne ordered an inquiry after the shares of life insurers tanked.
Worse, though, that the inquiry has had to be recalibrated after MPs decided that it was not sufficiently independent of the Financial Conduct Authority’s (FCA’s) board. Martin Wheatley, the FCA chief exec, has his work cut out to demonstrate that the episode was a one-off.
To that end, I’m told, he is holding meetings with the chief executivess of the major life insurance companies, many of whom remain furious about what they perceive as blatant hypocrisy from their regulator.
An FCA spokesman describes Wheatley’s ongoing round of meetings as “routine”, rather than a subtle effort to shore up support for his position.
Routine, eh? Of course they are.