Barclays Plc Chairman John McFarlane, barely two months into the job, ousted Chief Executive Officer Antony Jenkins and pledged to tackle a “cumbersome and bureaucratic” bank. The shares rose.
McFarlane, 68, who joined in April, will take over as executive chairman while Barclays looks for a successor to Jenkins, 53, the London-based lender said in a statement on Wednesday. Jenkins, a former consumer banker, took over from Robert Diamond in 2012 after the bank was fined for manipulating benchmark interest rates.
While Jenkins set up a bad bank, eliminated thousands of jobs and sold assets to bolster earnings, some analysts have said Barclays will struggle to meet its profitability targets unless it cut costs further at the securities unit. In an interview Wednesday, McFarlane said the bank had been mis-allocating capital and needs to boost revenue growth and productivity.
“There’s a new sheriff in town and he’s got the board’s backing to make sweeping changes,” said Sandy Chen, an analyst at Cenkos Securities Plc in London. “We have long advocated an aggressive pruning of the investment bank. The time for this, it appears, is now.”
The shares jumped as much as 3.6 percent, the most since May 20, and traded 3.4 percent higher at 12:44 p.m. in London. The stock has risen about 7 percent this year.
The board, led by Deputy Chairman Michael Rake, decided at a meeting two weeks ago to remove Jenkins after the non-executive directors said his changes weren’t happening fast enough, according to a person with knowledge of the decision, who asked not to be named because the discussions are private.
McFarlane told reporters on a call that the board was “unanimous” in its decision to replace Jenkins.
“It became clear to all of us that a new set of skills were required for the period ahead,” Barclays said in the statement. “New leadership is required to accelerate the pace of execution going forward,” with McFarlane “ideally qualified in this respect.”
Barclays isn’t in a rush to name a replacement, which could be an internal or external candidate, McFarlane said.
For the next CEO “it would be good to have someone familiar with investment banking as it’s such an important part of the group,” the chairman said. The candidate must also be familiar with regions where Barclays makes the most money, the U.K., Europe, U.S., Canada and Africa, he added.
U.K. bookmakers Paddy Power Plc has Finance Director Tushar Morzaria at odds of 2-5 to succeed Jenkins -- meaning a successful five-pound ($7.7) bet will yield two pounds of winnings.
McFarlane replaced David Walker with the bank mired in misconduct scandals such as the rigging of global currencies. As executive chairman, he assumes a similar role to his previous position at Aviva Plc, where he helped restructure the U.K. insurer, replacing most of the board and boosting returns.
“For the past three years, Barclays has been in a holding pattern and Jenkins was the perfect pilot for that,” said Jason Kennedy, CEO of London-based recruitment firm Kennedy Group. “If the bank ever wants to land and save its investors, it requires a pilot that can see through the bureaucracy and drive the bank forward and thus streamline the investment bank arm.”
McFarlane criticized Barclays’s bureaucracy, blaming it for slowing decisions and holding back necessary changes. He cited as an example that the bank has 375 internal committees.
“Whilst we had some share price improvement over the recent period, our stock price is exactly where it was six years ago, our dividend is low and flat,” he said. “We need to move as quickly as we can, but the company is unfortunately quite cumbersome in terms of its execution with these things.”
Under Jenkins, Barclays pledged to eliminate some 7,000 jobs at the investment bank and cut the division’s share of group assets to 30 percent from about 50 percent.
His efforts failed to have a quick impact, with the securities unit reporting a 2.7 percent return on equity, a measure of profitability, in 2014, down from 8.2 percent a year earlier and below Jenkins’s group target of 12 percent. That’s the least profitable of the bank’s four units.
The unit, run by Tom King, underperformed Deutsche Bank AG’s investment bank in the first quarter as it trailed in equity trading and advising clients on mergers and securities sales.
“The CEO has not acted fast enough on restructuring non-core and capital generation and the group is too bureaucratic,” said Joseph Dickerson, an analyst at Jefferies International Ltd. “While Mr. McFarlane is CEO we would expect some acceleration of non-core rundown initiatives.”
Jenkins joins CEOs Anshu Jain and Brady Dougan who left Deutsche Bank and Credit Suisse Group AG respectively this year. The moves mark the passing of an era when trading profits paved the way to the top job at Europe’s largest banks. Bill Winters also replaced Peter Sands at Standard Chartered Plc last month after two years of declining revenue.
Jenkins will receive his 1.1 million-pound annual salary until July next year, his role-based pay of 950,000 pounds and pension allowance of 363,000 pounds and remain eligible for a pro-rated bonus for 2015.
(An earlier version of this story corrected McFarlane’s age.)
Read this next:
- Britain’s Stocks Rise Before Budget With Barclays, Tesco Leading
- Jenkins Joins Roster of Former CEOs as Banks Look for New Skills
- Rock Star McFarlane Reprises Aviva Hit With Barclays CEO Ouster