Bob Diamond, the previous chief executive, left in the midst of last month’s Libor scandal. Diamond began his career as a bond trader and subsequently established his reputation by building a world-class investment bank – something no other British bank has achieved in many decades.
At the height of the financial crisis, Diamond decided to buy the bankrupt Lehman for a token amount over a weekend. This was a ballsy trade and it tells us a lot about the man who engineered it – he is a risk taker, a man who makes quick decisions based on incomplete information: the ultimate trader.
Jenkins is a different beast. One of the first quotes attributed to him on his appointment was his comment about his “obligation to all stakeholders – customers, clients, shareholders, colleagues and broader society”. This is a quote that could have been pulled from It’s a Wonderful Life. In the 1946 film, George Bailey, who runs his family’s small local bank, is reminded of all the good that his actions have contributed towards the common good of the town. In the heady, wild and crazy credit boom days, the notion of a bank working for the good of all its stakeholders and the society in which it operates was deeply unfashionable. Jenkins may try to run Barclays on different values.
As part of the process of appointing a chief executive, informal discussions with major shareholders to get their opinions and tacit approval would have taken place. This decision gives us an insight into the thoughts of both the current executive board at the bank and its main investors. This provides guidance as to the future direction of the business.
Despite the large profits that investment banking generates, Jenkins’s appointment suggests that supposedly boring retail banking has become sexy again. At the very least, the bank’s focus will shift away from investment banking with Jenkins at the helm. But ultimately, his appointment raises the possibility that Barclays is readying itself for the Vickers report’s recommendations: to create a split between its retail and investment banking.
So as Jenkins takes to his new, larger office, he faces a Herculean task. He has to get a grip on an investment banking business that is still one of the biggest in the world and a significant profit generator. Shareholders will want to see his vision of the future, especially given the dire stock price performance. He will also need to get a grip on the current criminal investigations and massive regulatory changes facing the banking industry. Jenkins must also be able to handle parliamentary questioning and media scrutiny – he is no longer anonymous.
Jenkins is not quite scandal free, having been head of retail banking when the payment protection insurance and interest rate swap mis-selling took place. But all in all this is a smart appointment, his are a safe pair of hands for the times we live in.
For the sake of all the bank’s stakeholders, let’s hope Jenkins lasts longer than his predecessor (who was only in the job for 18 months). Britain’s largest bank needs a firm hand at the tiller to steer it through the current troubled waters.
Louise Cooper is a markets analyst at BGC Partners.