- Was board favorite in 2012 for job that went to Antony Jenkins
- Second chance for former JPMorgan investment-banking head
First he was an heir apparent to Jamie Dimon at the biggest bank in the U.S. Then he came close to getting the top job at Barclays Plc, a company older than the U.S. itself.
Three years later, Jes Staley is the closest he’s ever been to getting a big bank’s chief executive officer seat. The wrinkle is that it’s at Barclays, a firm where performance is dragging, Chairman John McFarlane has suggested competing with U.S. rivals is futile, the last two CEOs were pressured to leave, and bankers have jokingly revised “RISES,” a company motto, to “CRISES.”
Staley, 58, has to come up with a way to fix Barclays’s investment bank, its least profitable unit. If he has a good solution, he’ll complete his ascent from a Pennsylvania high school student who eased his stutter by giving speeches on subjects picked from a bowl to a CEO with a shot at reviving Britain’s second-biggest lender.
“Jes has risen to the occasion over his entire career, and I’ve been up close and watched it,” said Sandy Warner, J.P. Morgan & Co.’s CEO before its 2000 merger with Chase Manhattan Bank. “Having said that, I’ve asked myself a couple of times, God, I’ve run one of these things, is this a doable job? I don’t know.”
Staley was interviewed by U.K. regulators last week, the final hurdle to his appointment. The bank is awaiting their approval before it can name a new CEO.
Staley, who declined to comment for this story, has dealt with Wall Street strife before. When he was promoted in 2009 from head of JPMorgan Chase & Co.’s asset-management unit to take over all investment banking, he was seen as a top candidate to succeed Dimon. A year later, Staley told an interviewer for a magazine profile he would leave after a few years if Dimon didn’t step aside.
Dimon stayed and demoted Staley in 2012 during the reshuffling that followed a loss of about $6.2 billion by a trader known as the London Whale. Staley wasn’t in charge of the unit where the loss occurred.
He left the bank in 2013 for BlueMountain Capital Management, a hedge fund that helped JPMorgan unwind its Whale positions after profiting by being on the other side of some of the bets. A day after the job announcement, Dimon told a San Francisco conference that some of his top executives had “acted like children” during the Whale fallout. He didn’t name names.
“They were running around with their head chopped off, ‘What does this mean for me personally, how’s my reputation?’” Dimon said. “You learn the good and the bad about people, and that’s invaluable.”
Dimon’s decade-long reign at the top at JPMorgan, where former members of his inner circle have taken top jobs at Visa Inc., First Data Corp. and Standard Chartered Plc instead of replacing him, has outlasted three CEOs at Barclays.
Staley, who met his wife in Brazil, has two daughters and lives in New York, could be the next. His custom-made 91-foot yacht has sailed to Europe before, according to a letter he wrote to the boatyard that built it, describing his dip in the cold Baltic Sea and the boat’s cedar and ash. He went to Bowdoin College in Maine and high school in Pennsylvania, where he joined the debate team and practiced speaking off the cuff to overcome a stutter.
“I remember when the letter B scared me, and I remember when I would do anything to try to avoid the letter W,” Staley said while accepting an award from the American Institute for Stuttering last year. “Toward the end of my senior year we actually started here and there to insert a sentence that began with the word ‘why.’”
Colleagues said Staley was open to learning as a boss at JPMorgan, where he spent 34 years and managed the firm’s brokerage in Brazil before moving to New York.
“What made him a good boss is that he was consultative -- it wasn’t, ‘Let’s do this,’ there was a discussion,” said Houda Foster, who worked for him after his private-banking promotion in 1999. “You get your people to accept the goals without realizing that they’re being led.”
Rick Lazio, the former Republican Congressman from New York who joined JPMorgan in 2004 as a government-relations executive and took a seat on its executive committee, said Staley wasn’t afraid to take risk.
Some of those risks worked out better than others. He helped make JPMorgan one of the world’s biggest hedge-fund managers after championing its acquisition of Highbridge Capital Management, whose assets rose to $28 billion this year from $7 billion when the partnership was announced in 2004. JPMorgan is close to selling most of the business to the executives who run it, according to a person with knowledge of the matter.
Staley’s oversight of a deal with American Century Investments didn’t go as smoothly. According to arbitrators, his team promised to promote that firm’s products when the bank acquired its retirement-plan services unit. Then JPMorgan employees pushed their own firm’s products, with Staley mistakenly thinking that the fee his bank would have to pay American Century if it didn’t keep its word was capped. The arbitrators ordered JPMorgan to pay American Century $373 million in 2011. A spokesperson for the bank said later that it strongly disagreed with the decision and the award.
The challenges facing the next CEO at Barclays are immense. Bob Diamond, the Massachusetts-raised executive who oversaw the investment bank’s expansion, was pressured to leave in 2012 after Barclays admitted to rigging global interest rates. He’s a former bond trader who told Parliament in 2011 that the era of “remorse and apology” from bankers should be over, while Staley said last year they’ve got to win “the trust and respect of broader society.”
The board wanted Staley to replace Diamond, according to three people involved in the 2012 CEO race, but chose someone else because of fear that regulators, politicians and the media would be infuriated by another American investment banker taking control of London-based Barclays. Directors were especially nervous because they’d have to pay him about $30 million to extract him from his JPMorgan contract, two of the people said.
Antony Jenkins took over instead. The British retail banker was so far from the usual Wall Street pomp and ferocity that he said during the World Economic Forum’s 2013 gathering in Davos, Switzerland, that Barclays had been too aggressive and self-serving.
One Barclays motto under Jenkins was “RISES,” an acronym for respect, integrity, service, excellence and stewardship -- ideals emblazoned on see-through blocks at the bank’s Canary Wharf headquarters. A joke circulating among bankers has been that Jenkins should add clients to the list to make “CRISES,” according to two people who work at the unit.
Even though Jenkins’s appointment was designed to appease critics, the bank’s past overshadowed his efforts to reform its culture. A year after the 290 million-pound ($445 million) fine for rigging Libor, authorities around the world started probing Barclays for gaming currency markets, culminating in about 1.5 billion pounds of fines in May.
Last year Barclays’s investment bank reported a return on equity, a common measure of profitability, of 2.7 percent, down from 8.2 percent in 2013 and less than a fourth of the bank’s 12 percent target. Even with performance improving in the first half of 2015, the unit remains the bank’s least profitable division, trailing credit cards, business in Africa and personal and corporate banking. It also requires the most capital. The bank reports third-quarter results on Thursday.
McFarlane, who fired Jenkins in July, has said the 325-year-old bank can’t compete with its bigger U.S. peers. He’s backed a commitment to keep shrinking the investment bank, which began under former CEO Jenkins, 54.
“All dominant investment banks are North American and are the only ones that can claim to be global and successful,” McFarlane said that month.
While some speculate that Staley would represent a return to Diamond’s aggressive style, he supports faster and deeper cuts to the investment bank, especially trading operations outside New York and London, according to a person familiar with his plans for the bank.
To emphasize that Staley’s a responsible choice for the bank, McFarlane said last week in London that he’s “not an investment banker,” even though he ran JPMorgan’s investment bank for three years. McFarlane called him “a client guy” who “started out as a commercial banker, like me.”
Seven years after taxpayers pledged about 1 trillion pounds to support Britain’s banks, some of the fury is quieting. With the government selling down its stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, Chancellor of the Exchequer George Osborne has backtracked on a plan to assume that senior bankers are guilty until proven innocent and told some of them at a June dinner he’d curtail “ever larger” fines.
Staley will want regulators and politicians to back him more than they backed Diamond, the man then-Business Secretary Peter Mandelson called “the unacceptable face of banking.”
Back in high school, Staley “had the kind of charisma that only the best politicians possess,” longtime friend John Farmer, a former dean of Rutgers School of Law–Newark, said before Staley’s speech at last year’s A.I.S. award ceremony, according to a video posted online. It mistakenly labels Staley as the former CEO of JPMorgan.